Can tying two rocks together produce something that will fly with investors? That’s the question that leaps to mind upon reading that AOL (s aol) is mulling some kind of takeover/merger bid for Yahoo (s yhoo), which may or may not involve a restructuring of Yahoo and backing from private equity firms, according to a somewhat confusing report in the Wall Street Journal (s nws) late Wednesday. A subsequent report by Bloomberg says that Yahoo has hired an investment bank to handle any overtures from AOL and private equity, which sources told the wire service are in the works. All the sources involved say the talks are preliminary and warn that a deal may never take place. It’s a good thing that they do, because an AOL-Yahoo merger sounds like the worst idea since… well, since AOL and Time-Warner (s twx).
To recap that mind-boggling train wreck, AOL merged with Time Warner just as the Internet investment bubble was peaking in the late 1990s, and the combined company quickly started to hemorrhage billions of dollars in market value, making it arguably one of the worst business deals since the dawn of recorded history. A combination of AOL and Yahoo may not be quite that bad, but taking two old and faded Internet giants and roping them together sounds more like a Hail Mary pass (or a trial balloon) than it does like a coherent strategy for growth or success — for either company.spending $50 million on hyper-local journalism recent acquisition selling off or outsourcing virtually everything
The reality is that both companies — and Yahoo in particular — have failed to show any compelling evidence that they understand what the real-time web is about, or how they are going to get from where they are (which in AOL’s case in particular, is not a good place) to where they need to be in order to take advantage of that fundamental shift in how the web functions (which Om described here). It’s true that both companies still have millions of unique monthly visitors, and advertising-based businesses that cater to those users, but the future of that kind of platform is murky at best.
The two portals are like fish trying to grow legs and run — not an easy transformation to engineer — and it’s not clear how merging into one giant old mega-portal is going to help them do that. Of course, if such a deal does actually proceed it will probably be fun to watch, in the same way that people often slow down to watch a car accident.
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