Yahoo is being publicly courted again. This time, there is talk about a possible AOL merger. At the same time, Yahoo has announced it is going to test AdSense over 3 percent of its search. What is to become of Yahoo?
As far as truly meaningful, high-impact developments in the online media industry go, no story has been as important as the talk of one of the internet's earliest endemic brands -- Yahoo -- being looked at as an acquisition target by several of what are arguably some of the internet's most important companies.
First it was Microsoft, a company that while not born online has been integral to shaping the space in more ways than most companies can claim to have done. If you remember Netscape, then I don't have to tell you how. And if you don't remember Netscape, my answer won't make any sense to you, anyway.
Yahoo rebuffed the gesture rather unceremoniously, the reason given being that the price Microsoft offered undervalued the company (the offer was $44.6 billion, some 62 percent over Yahoo's market capitalization given its share price at the time). What price would make Yahoo happy is not clear, at least in the letter CEO Jerry Yang and Chairman Roy Bostock sent to Steve Balmer, CEO of Microsoft, on April 7.
Last week, The Wall Street Journal reported that Yahoo and AOL are working on a deal to combine the two companies' internet operations. What has been discussed is that Time Warner would fold the AOL unit into Yahoo and make cash investment in return for about 20 percent of the combined unit. Yahoo would take the money from Time Warner, add to it, and buy back several billion dollars worth of its own stock at a price higher than Microsoft's offer of $31 per share. This would yield greater return to existing shareholders who sell to the new Yahoo while turning what is left of the company over to hands other than its own.
The same question rises in the wake of this latest development as when Microsoft made its Yahoo bid back in January: What does this mean for the advertising industry? But whereas the question at the time of the Microsoft bid rose more like effluvia in the bathtub -- noticeable but harmless -- this time it is more like effluvia in the hot tub; inconspicuous and not worth mention.
The merger of AOL and Yahoo would be the coming together of two internet media pioneers that have lost their way in a changing media landscape. Strange to say that about two companies that were once darlings of the "new economy," but both saw the underpinnings of their original business proposition around which they built themselves disappear and have never really found a way to merchandise the brands they became -- and the audiences they've accumulated -- into something new.
AOL was built on being an entry point for online content (even if that content was within the confines of AOL's own walled garden). The price one paid for getting online was AOL's bread and butter; online advertising was just something extra to put between the slices.
Yahoo became the brand it did by having a sensible directory for what was fast becoming the World Wide Web. This may be a surprise to some, but Yahoo was never a search engine; it was always a directory, with listings submitted, vetted and posted by people.
Eliminating its subscription service affirmed AOL was in an environment that had changed beyond the walled garden. Yahoo's turn first at being a "portal," which essentially meant that it was going to try to compete with proprietary services like AOL for a market that was already going to start disappearing, took the company's eyes off what was about to become the biggest source of online revenue, search. While then making a relatively unsuccessful run at being a source for original content, Google was left alone unobstructed to become a verb.