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If Yahoo & AOL Merge, Will They Turn to Google for Search?

posted on March 5, 2008


There’s lots of speculation and rumor today that Yahoo and AOL are in desperate merger talks (again). Yahoo is hoping to find some alternative suitor to the aggressive Microsoft, and AOL could certainly use the efficiencies that would come from a merger.

To give the talks enough time, Yahoo has delayed a pending board nomination deadline.

Yahoo said the deadline for nominations would be 10 days after it announces the date of its annual shareholder meeting. The previous deadline was March 14.

In a statement, Yahoo said the extension would allow its board "to continue to explore all of its strategic alternatives for maximizing value for stockholders without the distraction of a proxy contest."

While Silicon Alley Insider doesn’t think the deal will happen–despite it making sense for both Yahoo & AOL–there’s another consideration, that I’ve not seen discussed.

If AOL and Yahoo merged, would Google take over their search business? Look at this…

The Times, citing unnamed people close to Yahoo, said a Yahoo-AOL combination has the backing of Google Inc., which owns 5 percent of AOL LLC. and fears a Microsoft takeover of Yahoo.

Ah yes, Google does indeed own 5% of AOL.

Here’s where it doesn’t make sense. An AOL/Yahoo merger should allow the two companies to better challenge Google’s search dominance. So why is Google backing the deal–and not scared of the challenge?

My guess is that if AOL and Yahoo merge, they’ll agree to hand off the search business to Google and instead focus on their portals and web tools.


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  • http://www.newhomessection.com Jayson

    Ahh – there’s no fun in that. I don’t like the idea of every one turning to Google for search – yeah the algo produces decent/good results but they could use improvement and I some times find great websites and information by using Yahoo. Some of this stuff would never have been found using Google.

    I don’t know about quitters; it sounds like Yahoo and AOL may be quitters.

  • http://www.capatrex.com Alex Isaacs

    Here’s where I’m stummped. Can someone shed some light on why Yahoo is so reluctant to Microsoft’s offer?

  • http://www.marketingpilgrim.com Andy Beal

    @Alex – a number of things. Culture clash and a low-ball bid probably rank at top of list.

  • http://www.capatrex.com Alex Isaacs

    Obviously profits drive the incentives of a particular firm in it’s relative industry. If Yahoo continues to lose market share to Google, and with it advertising dollars they may never be able to recover. Hopefully they don’t look back retrospect and kick themselves. I like yahoo. They offer a lot of value added services besides a search engine.

    Thanks for the insight Andy!

  • http://www.trbr.net Seomotion

    I think No. Google have the biggest part of search traffic in the Internet.

  • http://www.herbalexcel.com Steve Rosenbaum

    Here’s why I don’t know if the AOL equation makes sense to Yahoo. Let’s assume they merge…I can’t see the adjusted share price of Yahoo heading anywhere but south from it’s current levels. Let’s face it, Bill Gates wants Yahoo, and I think Yahoo is strategically positioning itself for Microsoft to come back to the table and up their offer. I think it’s a great tactical move by Yahoo.

  • http://www.greatpriceshere.com Nicole

    This is something I didn’t know. If Google can takeover the Search function after the merger, it is going to be the unchallenged leader. MSN is way behind in any case.

  • http://www.theredteebox.com Will Clark

    With pressure for the shareholders I cannot see Yahoo abandoning the search business. They are desparate to find a partner who can help them compete with Google.

    http://www.theredteebox.com

  • Tim Beauchamp

    Perhaps Google feels they can wait out any competition and eventually end up with the market share regardless of what mergers or takeovers occur.

    Search is a biz with a very high fixed cost and low marginal cost, perhaps the perfect example of an ‘economy of scale’ business that rewards a market leader.

  • http://www.magnoliawebdesigns.com Littleman

    That’s a whole lotta if’s and I don’t think any of it will come true. All the big boys are on the move and all of them will change direction in the next 2 years. Most of the small guys will get eaten up and combined into bean pot. History repeats again and again but I don’t see the number 2 guy bowing to the number 1 guy just yet.

  • http://www.golfskorts.com Peg Clark

    Unless Microhoo does something truly dynamic in nature they won’t gain any ground on google.

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