A Yahoo and AOL Merger Wouldn’t Solve Problems for Either

Yahoo recently made a small fortune by selling $8 billion of stock in Alibaba last week, and “activist investors” Starboard Value– you remember them from the stories of the group’s 300-slide PowerPoint detailing Olive Garden’s pitfalls –thinks that some of this money, at least, should be used to acquire AOL.

Now, in case you just did a double-take reading that, consider this: it’s not all that insane an idea. In fact, it’s one that has been proposed and negotiated, ad nauseam, since Tim Armstrong took over AOL a few years back, and it was separated from then-parent Time Warner. AOL has made considerable improvements to their display advertising business; it dropped Patch, which caused nothing but trouble for the company; and they are righting the ship with the Huffington Post, which only became unprofitable after being acquired by AOL. Each of these alone is more than Yahoo’s accomplished in recent memory– combined, they make AOL look like a Google by comparison.

And, it’s not like Starboard doesn’t have a good eye for these sorts of things (I thought the Olive Garden preso was brilliant, btw): all of those positive changes I mentioned that AOL made? ALL were recommended by then-stakeholder Starboard Value. 

Here’s the problem.

While Starboard undeniably has strong business sense, they certainly aren’t digital marketers. And considering that both AOL and Yahoo make a considerable portion of their revenue through advertising, that minor point may just be the reason why this merger wouldn’t be a good idea.

See, there’s a few things that neither Yahoo or AOL do very well. Email, mobile, search– you know, things that are kind of a big deal in digital advertising. AOL does content fairly decently (TechCrunch, Huffington Post as examples); Yahoo made some noise recently by breathing new life into Community…again, alone, these are great revenue drivers. But, wrapped up in a giant media conglomerate, with all of the overhead and dead-weight that comes with it (like, for instance, email, mobile, and search) doesn’t fair well for either.

Together, Yahoo and AOL would have an email product nobody uses anymore, an overall shitty mobile experience (even Yahoo’s Fantasy Sports app, a product which should be one of the company’s biggest draws, is underwhelming at best), and a search engine outsourced to Google or Bing or whomever they decided to go with.

And would that draw more ad dollars? Hardly. Where Yahoo once could rake in $20 CPMs during peak seasons, they’re lucky to get half that now. With the gradual increase in the money that digital advertisers are spending on programmatic, AOL’s Advertising.com network won’t be seeing the kind of volume or prices it once enjoyed, either. And sites like Buzzfeed and Upworthy (despite my own loathing for them) are actually kind of mastering the “content is king” theory right now– something that AOL and Yahoo would both love to say, but neither can.

Look, I don’t claim to have the slightest inclination on what could legitimately save either AOL or Yahoo from eventual collapse. Personally, I believe AOL to be better off, for the moment– but neither are particularly exciting; either to advertisers, nor to consumers. But, combining both into one giant bloated mess of an Internet company hardly seems like the reasonable next step.

What do you think? Would a Yahoo and AOL merger, and the combined drawing power, cause you to consider spending more ad dollars with them?

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