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article imageIs an AOL merger with Yahoo more than a banker's fantasy?

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By Michael Krebs     Sep 11, 2011 in Business
In the wake of the Yahoo board decision to fire CEO Carol Bartz, rumors have begun circulating among Wall Street bankers that AOL may merge with Yahoo.
What would an AOL merger with Yahoo look like? What would the new Internet media empire feel like? These were the tactile questions circulating through certain Wall Street circles in rumors that were published on Friday.
However, as BizJournal notes, while Yahoo has its considerable troubles, as amplified in the very recent ouster of their CEO Carol Bartz, AOL, still reeling from what is appearing to be a disastrous acquisition of the Huffington Post property, is likely not in a position to take on another challenging Internet entity.
Like AOL, Yahoo is suffering from a loss of identity, as current-day Internet darlings like Facebook, Twitter, GroupOn, and to some extent Google have owned certain marketing revenue streams in recent years, with more advertisers seeking social media and branded content solutions.
In this environment, search engines have had to diversify, moving into editorial content, as Yahoo has done, and morphing toward social media applications, as Google has most recently introduced with Google+.
But the changes were too rapid for Yahoo CEO Carol Bartz, who struggled with stagnant revenue streams and an audience base that did not stay with Yahoo's content long enough to slow the revolving door of advertiser investment.
On Friday, Bloomberg published a speculative report, suggesting an AOL merger with Yahoo. But as the weekend unfolded, the Bloomberg assessment was seen as one steeped in Wall Street fantasy.
The matter was seen as quite "ridiculous" from The Atlantic, who characterized AOL's CEO as "hardly a savior."
"While a combination of AOL and Yahoo is always an option, with the main advantage being that it solves Yahoo's leadership search problem if Armstrong becomes the CEO, it is not a particularly good option. Two dogs don't make a right (at least in the eyes of Wall Street)," The Atlantic quoted TechCrunch's Erick Schonfeld as having said on the topic.
AOL is digesting significant monumental problems, and it is unclear if AOL CEO Tim Armstrong can steer the company clear of the challenges it faces. Like Yahoo, AOL is struggling with keeping its audience tuned in long enough for marketers to take notice. Additionally, its recent costly acquisition of Huffington Post has led to considerable infighting internally, represented most recently in the abrupt departure of TechCrunch founder Michael Arrington, who was fired from AOL after issuing a public ultimatum seeking editorial independence from Arianna Huffington, as the Los Angeles reported last week.
But Salon's Alex Pareene came to a conclusion on the issue, according to The Atlantic report.
"AOL and Yahoo should DEFINITELY merge, and then they should buy Gawker and Time Magazine and Arianna Huffington should run ALL of it," Pareene said.
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