Sep 27, 2014

Should Yahoo acquire AOL?

Some Yahoo investors are pressuring the company to acquire AOL. It actually amazes me that AOL is still around and it is a profitable company, but apparently it is. Would acquisition of AOL benefit Yahoo? Should they do it?

It seems to me that it would be a total waste of Yahoo's money and time. I doubt they'd get much from AOL that would help them, and most people these days don't give a hoot about AOL. That company belongs in the distant online past.

I feel a little like that is asking whether BlackBerry and Palm should merge. Combined AOL and Yahoo account for less than 4% of all digital advertising spending. By way of comparison, Google accounts for about 35%. That’s still many millions of dollars, but they are not the big players. 


Honestly, I think a common reaction by most people to this story will be, “Is AOL still around?” One of the core arguments in letter sent by Starboard Investments, the investors pushing the acquisition, is that it would result in significant savings by reducing management overhead and combining display business (read advertising). Of course, Starboard left out the word “maybe.” The two companies have a shrinking piece of the advertising pie, and while combining the two may help revenue somewhat by making it easier to “one stop shop” for advertisers...assuming that those advertisers want to exclusively market to the users of Yahoo and AOL. Sure, that may be great for The Scooter Outlet or Dentures Today!, but I’m not so sure that is a huge appeal to most companies. 


In the end, I think it is more or less irrelevant whether the two companies merge. They are not a disruptive force in the online marketplace, and I really don’t see that changing. What sort of mobile presence do they have? Very little, and without that your company has problems. On the other hand, Yahoo is flush with cash from all of the Alibaba stock it just sold, so with all those billions burning a hole in their pocket, who knows.

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