Thursday, October 14, 2010

Will AOL Buy Yahoo?

AOL has finally separated itself from Time Warner and been slowly, diligently, rebuilding itself into an online content powerhouse. In fact, I bet most of us visit a site that is owned by AOL. We simply don't think of AOL that way yet. We still know them as an internet service provider. Well sometimes big steps need to follow small steps and a Yahoo purchase fits that latter category. "Yahoo Inc.'s inability to snap out of a financial funk may be about to turn the embattled Internet company into a takeover target for the second time in less than three years." And the timing might be right for AOL to make that offer.

Both sides deny talks and some wonder if AOL can afford to make this purchase. Should it happen, on the surface it looks like a great fit. Would both brand names survive, I doubt it. To me, the Yahoo brand has more equity today than AOL. And AOL's content sites don't use AOL to push their positioning. Where synergies seem to exist, both companies would benefit from greater economies of scale. And the online reach could start to rival Google and others.

So is the speculation true or just an attempt to start the consideration process? Regardless, the evolution of any industry, including online, is consolidation. The big need to get bigger. The big fish swallow the small fish, and that is how the game works.