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Yahoo is going to merge with Cisco or Amazon -- or maybe Wal-Mart.
Jeez Matt, don't give them any ideas! From the sound of it if they have to choose MS or death, they may choose the tailpipe.
1) Yahoo! maintains its position as the top site on the web. Quantcast shows that adding AOL’s visitors to Yahoo!’s puts Yahoo! at almost 200 million monthly uniques, almost 50% ahead of Google. ComScore data is less exact, since it groups AOL under “Time Warner Network”, but still shows the same trend:
- http://www.quantcast.com/top-sites-1
- http://www.comscore.com/press/.....press=2000
2) Yahoo! becomes the dominant player in IM. Yahoo! Messenger is already interoperable with Windows Live Messenger; adding interoperability with AIM means that they control ~70% of desktop IM client market share(more recent numbers on this are needed, but by the end of 2006 AIM was ~50 million, and both Yahoo! and Microsoft’s were ~20 million), and their clients can talk to everyone else’s. Yahoo! and AOL have both made progress in integrating IM with E-mail, something Microsoft still hasn’t done. As Yahoo! expands its e-mail services into enterprise markets, and enterprises increase their usage of IM, this could be a big deal.
3) Much better integration potential than with Microsoft. After being stuck in Time Warner’s in-fighting old media bureaucracy for so long, I’d imagine that AOL employees would be overjoyed to be brought into an organization that understands and is about the web. There’s also excellent potential for brand integration here:
- Yahoo! is a brand AOL users would be comfortable with.
- It’s a brand that it makes sense for AOL to adopt as it’s been expanding overseas operations(where Yahoo! already has a strong presence).
- The Yahoo! brand offers a graceful way to retire a brand that the tech-savvy have long scorned.
- Go to Yahoo.com, then go to AOL.com. The portals are almost identical. It’s feasible that a full-scale integration of the two properties could at some point take place.
4) There are plenty of other reasons why an AOL/Yahoo! merger has potential. Concentration of content-provider partnerships, joint efforts in mobile services/advertising, online/offline music offerings, and the fact that both are much more youth-friendly brands than MSN or Google. Plus more.
just don't think it would be very good. And I certainly don't think
it has as much potential as a merger with Microsoft, even though I
don't think that would be all that great either.
You are quite right that Yahoo would get more users, and that the two
could merge their IM services, but I don't see how either one of those
things would mean a big boost for Yahoo in the places where it really
needs a boost -- namely, monetizing its user base and/or competing
effectively in search.
AOL has no search capability of its own, having given that job to
Google, and it hasn't shown any more ability to monetize its millions
of users than Yahoo has. Adding more users isn't the solution.
Also, the mobile services I mentioned earlier are something Yahoo! and AOL have both been working hard on, and in the early stages of an emerging market, their integration could give them a big lead on other competitors. Mobile advertising has a lot of potential, especially when you add local map-based services, yet another area where a Yahoo!/AOL merger would create a clear leader that's likely to last.
Another method of monetizing their userbase is through entertainment services. AOL has the largest, most popular music portal online with a key partnership with XM Radio. Yahoo! has a renewed commitment to DRM-free music sales. With more promotion, and a partnership with an MP3-playing device maker(or one of the cell-phone makers they're partnering with for their mobile platforms), I bet they could outsell iTunes. They could also add streaming internet radio to their IM platforms, with tiny "Buy <song that's playing now> for 99 cents" notifications.
Those are just a few ideas. When you have that many users, and you're the leading provider of that many services, it becomes almost impossible *not* to find ways to monetize your userbase.
Finally, search. I'll simply repeat what Yahoo! has been saying since they announced their new strategy: Yahoo! is not a search company. It doesn't have to be. Search is only one tool web users need, not the only one, and not even the most important one. Yahoo! could take over AOL's search market share, small though it may be, enjoy the revenue it does provide, and focus on earning more revenue through display advertising on their other services, and other business models.
that Yahoo *should* be able to monetize its millions of users, and
even that it *should* be able to combine with AOL and leverage the
combined entity into music (or any other content for that matter) and
compete with iTunes, etc. All of that is like me saying that I
*should* be able to fly if I just flap my arms enough.
The fact is that Yahoo hasn't shown that it can build or grow any of
the kinds of businesses you're talking about, with the possible
exception of banner advertising, which is the slowest-growing and
lowest-margin ad business out there. That doesn't exactly fill me with
confidence about Yahoo's prospects in the event of an AOL merger.
http://spreadsheets.google.com/pub?key=pYFPEp3S...
And while Yahoo's profit margins may have be down from a couple of years ago, their profit itself has been going up:
http://spreadsheets.google.com/pub?key=pYFPEp3S...
To me, that looks like Yahoo! knows what it's doing. Increased expenses are likely a result of investing in innovations that Yahoo! knows will pay off later. If Yahoo! were such a crappy business, why would Microsoft be willing to *take on debt* to acquire it? More importantly, why would they be so insistent on doing it now, rather than waiting?
If Yahoo! truly is heading down the tubes, Microsoft could get it at an even better price, and Yahoo!'s shareholders would be even more insistent on accepting any offer. The truth is that Microsoft knows that Yahoo! is succeeding, and is taking advantage of Yahoo!'s weak position in the market(because the public is still relying on false metrics of success like search market share) to try and get Yahoo! while it's undervalued before the share price rebounds to where it should be.