Are Microsoft, Yahoo Courting Hell in AOL?
As U.S. senators mull the competitive nature of the Google-Yahoo search advertising deal, Reuters reports that Time Warner is fishing to make a deal with Microsoft or Yahoo for AOL's Internet division.
Has the world gone crazy?
I ask because the next big deal that anyone should be considering regarding the so-called Microhoo fiasco is whether Yahoo shareholders will blow up Yahoo's current board at the annual meeting Aug. 1.
Or, if you prefer an even less likely scenario at this point, Yahoo could agree to sell its search assets or entire company to Microsoft before the meeting.
Reviving rumors from as far back as February, sources familiar with the discussions told Reuters that Yahoo could merge with AOL, with Time Warner taking a minority stake in the combined company. Meanwhile, a deal with Microsoft would likely be an outright sale of AOL, the sources told Reuters.
Six months ago, I might have been all for a Yahoo-AOL tie up as an alternative to Microsoft gobbling Yahoo. Now I'm not sure.
Since February, Yahoo has laid out a bold, broad plan to open up its search platform to the public, and knock down the walls of its network of more than 266 million Yahoo Mail users.
How does AOL fit into that? How do you rationalize Yahoo's bid to build a massive social network out of its e-mail base with AOL's Bebo users? What sway would Time Warner have over Yahoo in this regard?
What about Microsoft buying AOL outright? I'm not sure about this course either. It seems like a poor substitute for Yahoo, especially considering AOL's search share through its portal lies somewhere between 3 and 4 percent.
In Yahoo, Microsoft gets over 20 percent search share and the lion's share of display ads from the outset. But what does Microsoft get from AOL? Well, Microsoft has long craved an entr??Â«e into social networking, so Bebo fills the gap.
I asked Forrester's Shar VanBoskirk to help with the other bits and she wrote me:
The greatest values of AOL today are its portal audience and its MapQuest and instant messenger applications. With this in mind, I think the most synergistic fit for AOL would be a purchase by Microsoft. Because AOL's greatest assets are MSN's greatest challenges today. Frankly, AOL doesn't have an exceptional online advertising platform, it has no search engine or search business to speak of, and its ad networks are healthy, but would be equally valuable to either Yahoo or MSN.
Ah, but Yahoo has the search and it has the Web mail and instant messaging bases Microsoft craves. What makes AOL the better fit than Yahoo?
It's not, according to VanBoskirk, who said she believes the shenanigans and back and forth between Microsoft and Yahoo have sullied any deal potential. She believes Microsoft should ditch Yahoo and buy AOL to supplement its existing assets.
VanBoskirk told me Yahoo should have taken the Microsoft deal in May, but is now better served spending R&D dollars to integrate its existing businesses, including search, display, social media, consumer communities and user generated content.
In contrast, IDC analyst Caroline Dangson is keeping her eye on the Microhoo ball, as she wrote me:
IDC still believes Microsoft will come back to Yahoo. Microsoft is just playing the dating game of trying not to look desperate and waiting for Yahoo to come crawling back, which would give Microsoft a better deal to negotiate a lower purchasing price. To compete with Google, Microsoft needs Yahoo and Yahoo needs Microsoft. Microsoft may be able to work out a deal where it gets both AOL and Yahoo, but AOL alone is not enough to make Microsoft a formidable competitor against Google.
Since we're already in Loonyville by adding AOL to the mix, I'm going to close by proposing something loonier: Microsoft buys Yahoo and AOL. It uses Yahoo Search Monkey and BOSS as the blueprints for a big search platform, integrating Microsoft Live Search.
Using the Yahoo Open Strategy for rewiring Yahoo Mail to let users connect with one another and Bebo as the consumer-facing portal, it forges a massive Facebook-like social network that includes MSN, AOL and Yahoo Web mail users. It then sells ads against that to battle Google.
What do you think? Is this a little nutty or Jack Nicholson-in-"The Shining" crazy?