From the vantage point of Jon Miller, former CEO of AOL (NYSE: TWX) and now a partner at the high-profile Velocity Interactive Group, the frenzied activity all makes sense, at least as a natural progression of the industry. Having worked in big media for a long time, and now looking at later stage startups as part of his investment thesis, he has a good grasp of the overall landscape. He is also among the possible nominees for CNET (NSDQ: CNET) Networks board, if the consortium carrying on the proxy fight wins. I spoke to Miller yesterday on the issues, and more (done before Time Warner announced its decisions on AOL today).
There are two trends in 2008: One is the consolidation between the big Internet players: Google (NSDQ: GOOG), Yahoo, Microsoft (NSDQ: MSFT) and AOL, and we’re starting to see that now with Microsoft-Yahoo (NSDQ: YHOO). The counter-trend is likely to be the de-consolidation amongst traditional media players. We are starting to see that in the last couple of years with Viacom-CBS (NYSE: CBS), and now IAC.
Effect on exits for smaller companies: Yes, they will continue. For traditional media companies, you’ll see the deal flow increasing. They are having increasing difficulty in scaling with the organic efforts. You will also see them by a wider variety of traditional media companies.
Options for Yahoo: They aren’t easy for Yahoo, because the Microsoft offer is both of a good value, and is closable. For the shareholder it has a degree of assurity that no one can match. If I was to handicap it, this would most likely happen.
Google & AOL: [Ed: The Google-AOL deal happened under Miller’s regime at AOL, where Google owns 5 percent in AOL] The two companies can certainly work more closer together, but this is not the level of transaction..any deal between MSFT-YHOO changes the landscape much more than any commercial arrangement between GOOG-AOL.
Anti-trust issues with anything Google does: They are no longer the upstart, they are the establishment.
Yahoo’s potential of breaking up: The value of Yahoo is its scale…this whole game is about increasing and consolidating scale. I don’t think that’s a likely outcome at all.
Options for AOL and Time Warner: The first question is: do you have to do something, or do you let this play out for a while? Microsoft or Yahoo are less potential buyers for AOL, certainly during this period. But AOL will have to be part of this consolidation trend at some point.
Would Facebook now come into serious play with the potential YHOO-MSFT deal? Facebook has reached the point where it is in the help-to-scale category, so yes, possibly.
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