Yahoo and AOL: Desperation squared

by Mathew on February 10, 2008 · 21 comments

The Times is reporting that Yahoo wants to restart merger talks with AOL as a way of avoiding the clutches of Microsoft, a move that — if true — is roughly equivalent to screaming “we’re totally desperate” from the rooftops of Yahoo headquarters. In this case, of course, it’s difficult to know who is the more desperate of the two, Yahoo or AOL. Neither has what amounts to a viable strategy, and neither has managed to capitalize on any of their vaunted media assets, despite years of trying.

Obviously, Yahoo has to cozy up to just about anyone (even Disney, apparently) in order to try and get Microsoft to jack up its offer from what the Web company believes is an insulting $44-billion or so. Like my friend Paul Kedrosky, I think Yahoo is going through the corporate-takeover equivalent of Elizabeth Kubler-Ross’s classic stages of grief — anger, denial, bargaining, etc. Right now it’s stuck in bargaining.

Fiduciary duty obviously compels the Yahoo board to fight the Microbeast, but it still seems somewhat futile. I hope Jerry Yang doesn’t try to actually float the idea that a merger with AOL would be a good thing for Yahoo — the howls of laughter would drown him out. Better for Yahoo to suck on a tailpipe out in the corporate garage than succumb to that. Rafat Ali at PaidContent says it’s pretty unlikely that Time Warner would do it, and Ashkan at HipMojo doesn’t think it’s too likely either.

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