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Can AOL Rescue Yahoo or Is It the Other Way Around?

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Can AOL Rescue Yahoo or Is It the Other Way Around?

Merger talks between Yahoo and Time Warner’s AOL have been around even during the failed Microsoft – Yahoo saga. But it is only now that the said deal seems to be getting on clearer ground.  Citing sources close to the negotiations, TC’s Arrington is reporting that both companies are in currently busy ironing out the details of the merger deal.

If indeed this merger talks come into a reality, it raises some interesting questions, one of which is the question on which of the two companies would benefit from deal? Structurally, the deal would have Yahoo acquiring AOL’s content service and advertising properties sans AOL’s subscription dial up business. It will also bring in some billion dollars into Time Warner’s fold and will give Time Warner some stakes in the Google-Microsoft search advertising battle. Or shall we say Google + Yahoo + AOL vs Microsoft search advertising war?

Looking at another angle aside from search advertising, a question that may be raised by those against the deal would have something to do with web email. A combined Yahoo and AOL would give the resulting entity a dominance in the web mail market including instant messaging as well. Both Yahoo and AOL’s mail and IM systems are two of the most widely used mail service worldwide. But Microsoft which is more of a competitor in this market than Google Mail, has less thing to worry about since the email market is not really one of its major thrusts.

On a more positive effect especially for Yahoo, this deal would give them a clear dominance in the online portal/services/content market. That would leave Google with Search market dominance while Microsoft probably left with nothing to dominate in the online market.

So, can this deal rescue Yahoo? Financially in the short-term it may not. But in the long run, it might actually bring some good things to Yahoo as a major Internet player.

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Arnold Zafra

Arnold Zafra writes daily on the announcements by Google, Ask.com, Yahoo & MSN along with how these announcements effect web ... [Read full bio]

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