It’s so they can their product R&D done for free.

You do a mash-up that they think is cool, YHOO or GOOG will build it themseves and compete with you. If you’re lucky, they might buy you at a discount. But at the end of the day, the entity you need to exist will become your competitor.

I ran the entertainment group at Y! in the mid to late ’90s. One of the products I spearheaded was Y! Games. We wanted to experiment with tournaments and rankings, so as an experiment we permitted Case’s Ladders to run rankings and tournaments on our site. It was a hit, so we had some conversations with them about “working more closely” (read that as you will. At the end of the day, they wanted more money than we wanted to pay for them (by today’s standards a small number, by the standards of 1999 a TINY number). Production, engineering and BD sat down and decided to do it internally. So we looked at what they did that worked, we looked at what they did that didn’t work, we assigned a single engineer to the project, and a month later we launched rankings and tournaments and turned off Case’s.

A company doing a mash up has ZERO leverage.

Remember, if you built it fast and easily, so can they.