Why MSN Should Merge With AOL (and Why Google and Yahoo Have Little to Fear)

(via Battelle) Henry Blodget has started his own blog at InternetOutsider, and has come out with a report (PDF file) on how Microsoft has lost the Web war to Google and Yahoo (the report is from his small research firm). He also mentions the recent rumors about MSN in talks to merge with AOL, and thinks that it is a good idea and the only way MSFT can fight the others. A great read, if nothing else…

“If Microsoft wants to give MSN the best chance of success, it should continue to talk with Time Warner about an AOL-MSN merger. For Time Warner’s sake, too, these talks should not concern a mere “partnership” or “investment.” Rather, they should be about merging the divisions and spinning the combined entity off as a separate company. A combined AOL-MSN would still lag Google and Yahoo! in most important areas (growth, advertising revenue, and cash flow), but it would be far stronger than either AOL or MSN alone….If AOL and MSN do not merge–or if Microsoft and Time Warner don’t pursue alternative solutions like marrying one or the other with, say, Yahoo!, instead–AOL and MSN will likely just continue to compete with each other for third place in the web wars…as former third-place wannabes like Lycos and Excite can attest, fighting for third place is a scary way to live. AOL and MSN need look no farther than the current state of these two 1990’s relics to see what will happen if they lose.”

Comments have been disabled for this post