ADOTAS – As Yahoo CEO Carol Bartz was getting beat like a redheaded stepchild across the tech media last week following the departure of three high-level executives and grumblings from shareholders concerning dumping the “outspoken” CEO, SAI’s Henry Blodget started a whole new round of media speculating by making a forceful argument for the beleaguered AOL and Yahoo to combine and form a super-portal.
Now sources of the “plugged-in” variety are telling SAI that private equity firms are phoning an intrigued AOL CEO Tim Armstrong about a merged AOL-Yahoo, a beast he would head up. A source earlier this summer said Armstrong, formerly president of the Americas at Google, really wanted the captain’s helm at Yahoo when cofounder Jerry Yang stepped down in 2008. Apparently he’s big on fixer-uppers — or perhaps he’s just a masochist.
Bartz wouldn’t necessarily be left in the cold — Kara Swisher at All Things D suggests she could be chairman of the joint entity.
There is also chatter about taking the company private (which I don’t think is a bad idea) but many doubt Yahoo will go for the idea, especially considering it has a $19 billion market cap. Yahoo also owns 35% of Yahoo Japan and 40% of the Alibaba group, a Chinese syndicate of Internet-based businesses, though CEO Jack Ma has been trying to buy back Yahoo’s shares. Swisher suggests Yahoo could sell them back to Alibaba and raise their stock price, which has been hanging around $14.
A former Yahoo-er and now an AOL-er thanks to that company’s acquisition of TechCrunch last week, Sarah Lacey has reasons for and against the merger, but her most interesting point against is that the merger would limit competition and further corrode the Internet journalism ecosystem.
The chief reason for these two operations to merge is to form a super-portal — really, the definitive portal. However, that would limit competition in the portal arena as the Yahoo-AOL front page and subsections (e.g., finance) would be must-buys for large display advertisers, effectively limiting the amount of spend for smaller media companies.
Portals certainly offer reach, but their actual content is limited, which is why affinity sites will remain highly important to display advertisers. As Evolve President Brian Fitzgerald pointed out to me several months ago, die-hard financial types may spend a minute on Yahoo! Finance scanning the headlines, but they move on to sites such as TheStreet.com or WSJ.com for the hard news and analysis.
Also, ad exchanges, audience buying and RTB are all growing in prominence, with some parties arguing that the future display ad marketplace will be primarily technology-driven. In addition, the display space has witnessed an increased use of retargeting and other behavioral-based techniques all year.
A Yahoo-AOL merger would certainly be great for the ad revenue of those two operations, but I don’t see it having a devastating effect on other publishers. In fact, it may attract more reluctant brands to the space as both companies have good reps when it comes to display branding. Where do you come down on the issue?