AOL-Microsoft: Will Cash-Rich Google Make A Play?

Day 2 of the new hot miniseries. Influential Merrill Lynch analyst Lauren Rich Fine stirred the pot today with a client note suggesting that Google could jump in.
From Fine: “Depending on the limitations of the AOL-Google contract, such a switch by AOL could put a significant dent in Google’s network website revenues. AOL is Google’s largest partner and accounted for 12 percent of Google’s revenues in 2004, or $380 million cited by the WSJ. To get a sense of impact on the bottom-line, simply assuming the mere loss of 12 percent of revenues from AOL (not even taking into account the loss of related accounts due to the AOL relationship and also some offset of costs), this could result in a 5-10 percent decline in EPS.”
With that in mind, Fine writes, “We believe it is entirely possible that Google could consider making a bid for AOL as well. This would certainly protect Google’s revenues from AOL as well as enable Google to keep 100 percent of the search advertising revenues as well as gain a significant amount of content. ”

Fine’s focus isn’t on Google alone. “Should such a deal between AOL and MSN materialize, it could pose serious competition for Yahoo as well as Google in terms of audience reach and comprehensiveness of content. According to August comScore data, AOL had 88 million unique visitors and 26 billion in page views and MSN had 100 million unique visitors and 18 billion in page views, in combination exceeding Yahoo’s reach of 122 million unique visitors and pretty much matching Yahoo’s 42 billion page views. In addition, this would give a significant boost to MSN’s search engine.”

More en route.

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