How Would An AOL-Yahoo Merger Affect Search?

There are rumors flying that AOL and private equity firms may be trying to buy Yahoo in a complex transaction that would involve a likely sale of Yahoo’s stake in Alibaba. Matt wrote up the item last night.

Bloomberg has more this morning suggesting that, as with Microsoft a couple of years ago, Yahoo is positioning to fight a takeover. One of the very hypothetical scenarios involves taking Yahoo private to “avoid the scrutiny of the public markets,” allowing the company to make some of the “tough choices” necessary to really turn it around.

Such a scenario would not involve AOL obviously. But there are several others being discussed and speculated about today. Wheels within wheels.

How unfortunate for everyone at Yahoo: more takeover drama. But all this last night led me to think, what happens to the Microsoft-Yahoo search alliance if a deal with AOL actually happens?

Recall that AOL renewed its search deal with Google for five years, and there’s a deeper relationship now than before. The Microsoft-Yahoo relationship is a ten-year deal. While there might be a way to reconcile them and allow them to operate in accordance with their terms, as a practical matter that’s probably impossible.

AOL and Yahoo would want to combine operations to eliminate inefficiency (and jobs) and the companies would ultimately want to work off the same “platforms.” Again this is super-speculation but it seems that either Microsoft or Google would be a loser in an AOL-Yahoo merger.

Would one of them be compensated for the lost value of the contract? Microsoft would immediately lose share and major reach for adCenter advertisers (the whole point of the “search alliance”). Google would be less directly impacted in terms of share but would also lose revenue and reach. I would imagine negotiations with Microsoft or Google would be very challenging and add to the cost of any potential AOL-Yahoo merger.

It seems to me a potentially thorny legal and financial issue that could become a major obstacle to any successful takeover or merger effort involving the two companies.

Related Topics: AOL: General | Channel: Industry | Top News | Yahoo: Business Issues | Yahoo: General | Yahoo: Search


About The Author: is a Contributing Editor at Search Engine Land. He writes a personal blog Screenwerk, about SoLoMo issues and connecting the dots between online and offline. He also posts at Internet2Go, which is focused on the mobile Internet. Follow him @gsterling.

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  • Tim Cohn

    It wouldn’t affect search per se because both Yahoo and AOL are online display advertising companies.

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