Is AOL a viable option for Yahoo against Microsoft?

Is AOL a viable option for Yahoo against Microsoft?

Summary: Yahoo's board met over the weekend and reportedly decided to chat with both Microsoft and Time Warner, who could unload AOL in some sort of deal. My initial reaction: What would AOL really bring to Yahoo other than a migraine?

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Yahoo's board met over the weekend and reportedly decided to chat with both Microsoft and Time Warner, who could unload AOL in some sort of deal. My initial reaction: What would AOL really bring to Yahoo other than a migraine? But when you check out Comscore's latest ranking of Web sites and ad networks perhaps there's more to AOL than meets the eye.

adfocus.pngI still maintain that a Yahoo-AOL tie-up can't trump a deal with Microsoft. Microsoft is offering cash and shares and values Yahoo at $31 a share. An alleged AOL-Yahoo deal is complicated and it's not clear what'll come out of it other than a nice exit for Time Warner. For instance, if Yahoo weren't trying to fend off Microsoft would it even consider a deal with AOL? Probably not.

But that doesn't mean AOL doesn't make sense on some level. Admittedly, pondering an AOL-Yahoo deal takes a bit of a leap. You have to assume that AOL can become nimble once it's extracted from the Time Warner empire. You have to assume that AOL's cratering subscription business can be extracted from any financial engineering. You have to assume Yahoo could do something with AOL. And you have to assume that there's more to AOL than what you can find in SEC filings. In other words, you have to buy into the idea that AOL can juice its advertising growth from the 18 percent clip it enjoyed in 2007.

Here's a look at AOL's annual ad revenue over the last four years:

  • 2007: $2.23 billion
  • 2006: $1.88 billion
  • 2005: $1.34 billion
  • 2004: $1 billion

That growth isn't exactly Google-ish. In fact, AOL's ad revenue is eclipsed by the subscription business, which is cratering by design. AOL is trying to be an advertising juggernaut.

But back to the original question: Is AOL useful to Yahoo beyond just annoying Microsoft?

Comscore's March statistics released Monday weave an interesting tale. Consider the following:

  • Yahoo sites had 139.5 million unique visitors;
  • Google had 137.5 million;
  • Microsoft had 121 million;
  • AOL had 111.8 million.

If you assume no overlap a combined Yahoo-AOL would have more than 251 million unique users a month. Microhoo would have 260.5 million. In either case, Yahoo with either Microsoft or AOL would make the company top dog in traffic.

But traffic doesn't mean much of anything if you can't monetize it. And here's where an AOL-Yahoo deal could get interesting. According to comScore's ad focus ranking AOL properties own the top two spots followed by Yahoo. AOL's Platform A and Advertising.com have reach of 91 percent and 89 percent respectively. Yahoo has an ad reach of 85 percent. Further down the list you find that AOL's Media Network has a reach of 59 percent and AOL has a reach of 49 percent. Comscore defines reach as the percentage of the total Internet population ($185 million) that viewed an entity at least once in March.

In terms of ad networks, a Yahoo-AOL deal would result in multiple ad networks that could roughly equate to blanket coverage. Again the question will be whether all of these properties could enhance monetization. Based on Comscore's ad focus rankings Google's Ad Network and Google has reach of 81 percent and 70 percent, respectively, but in profit's the search giant has no peer on the Internet.

If--and it is a big if--these networks can be coupled intelligently a combined Yahoo-AOL may generate some value. But the real value of AOL to Yahoo becomes clear when you consider Microsoft's rankings. Microsoft's MSN-Windows Live has 56 percent reach on Comscore's ad rankings. If Yahoo works a deal with AOL instead of Microsoft the software giant is left behind. That fact explains the buying panic Microsoft has for Yahoo. Without Yahoo, Microsoft is hurting on the advertising front.

Bottom line: AOL may not be the best move in the world for Yahoo, but it's clearly one that could scare Microsoft into raising its bid.

Topics: Microsoft, Social Enterprise

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61 comments
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  • Sure....

    Yeah, like Yahoo needs the boat anchor known as AOL hung around its neck.

    A year later all the Yahoo! shareholders will be wishing Microsoft HAD purchased Yahoo. And following that up with quite a few lawsuits, I would imagine.
    Hallowed are the Ori
    • AOL + Apple

      Apple should buy AOL since both over priced, over rated, and only suitable for amateurs.
      howmek
      • Keep in mind most of all computer users are amatures

        Few technology companies would survive if they lost their amature users.
        bernalillo
      • over priced

        Love my Mac cost me fifty quid never had a moments problem AOL just bounced email after email this morning so I hate them more than usual today and as for Microsoft they are the reason I bought a Mac you dont need to spend a fortune to have a happy computing experience Just avoid AOL AND MICROSOFT
        hoppity
  • maybe M$ should buy AOL

    M$ gats more share and it combines two lame businesses together.
    Linux Geek
    • Though not quite as lame

      as your persistent trolls.
      GuidingLight
      • Or yours... (nt)

        [b][/b]
        zkiwi
    • And call it LAM(e)OS

      or perhaps S(h)ALOM.
      fr0thy2
  • RE: Is AOL a viable option for Yahoo against Microsoft?

    No.
    Loverock Davidson
  • RE: Is AOL a viable option for Yahoo against Microsoft?

    Isn't that kinda like buying an Edsel to fight Ford?
    owner@...
  • RE: Is AOL a viable option for Yahoo against Microsoft?

    Anyone On Line? I agree, why would they want, much less need, AOL?
    p_r_smith@...
    • No one needs AOL

      No one needs AOL They just buy into their hype and cant for what ever reason (mostly lazyness) cant get out I think the industry call it inertia
      hoppity
  • RE: Is AOL a viable option for Yahoo against Microsoft?

    Yahoo needs AOL, about as much, as AOL needed Compuserve! It bought them a little more of what they already do [presumably reducing competition]. But in the end: Is there a money-making market for what either of them do (that isn't already being covered by MS, Google, etc)? Pull your finger out of the bucket...
    JimboInChi
  • RE: Is AOL a viable option for Yahoo against Microsoft?

    If Microsoft sucks, then AOL is a black hole.
    chatter1@...
  • RE: Is AOL a viable option for Yahoo against Microsoft?

    I think Yahoo should continue to tell M$ to stuff it. M$ is a company that could not build a workable version of what Yahoo, Google and even AOL are doing. When M$ buys things, they break them.
    Bill F.
  • RE: Is AOL a viable option for Yahoo against Microsoft?

    YES all Time Wraner did was drop AOL from $75 to $17 a share. AOL is Viable
    brian1russ@...
  • RE: Is AOL a viable option for Yahoo against Microsoft?

    There's no help there. Maybe they should let Time Warner finish the job they started. The only bad thing here is that real people work there.
    jjackson@...
  • There's a saying about online ad networks . . .

    "Ever notice how everybody has a reach of 80%+"

    As an advertiser, I'm always reminded of that truism whenever I'm getting the elevator speech from an ad network rep. They all seem to have the same reach. Because they're all overlapping on many of the same properties and users.

    That being said, AOL does have more to offer on the ad network front currently than Microsoft (although Microsoft's homegrown AdCenter platform is actually very slick; and the Atlas platform they acquired from Aquantive is the best out there BY FAR.) Like Yahoo, AOL as a whole has done a good job of leaving some of their 'cooler' acquisitions in recent years alone to let them do their own thing. It's come a bit at the expense of branding/consolidation, but it's allowed those properties to still thrive. Google's now facing the same situation with YouTube.

    As an advertiser, I was worried when I first heard about MS possibly buying Yahoo. Yahoo's still a top notch service for users and advertisers alike and they're finally starting to roll out some great, innovative services on the advertising front via their recent acquisitions (the stuff from AdReady and RightMedia is game-changing on the display ad front.)

    But once I realized an acquisition of Yahoo by Microsoft would mean Yahoo's ad platforms and sales teams (not Microsoft's) would probably be in the driver's seat due to their track record of success, I stopped worrying about it as much. Bring on the inevitable (unless Yahoo's ready to cut their own throat and give all their search ad inventory to Google.)
    RustyShackleford
  • eh?

    * Yahoo sites had 139.5 million unique visitors;
    * Google had 137.5 million;
    * Microsoft had 121 million;
    * AOL had 111.8 million.

    "unique visitors" means nothing for this kind of page, for example you can pass all the day browsing videos on youtube.
    magallanes
  • Is AOL still in business?

    I swore off anything to do with the cancer of AOL over a decade ago. I rarely see the moniker in an email address anymore, thank goo(g)ness.

    Does AOL have any customers anymore? I have not seen them for years!
    Steve@...