Posted by: Rob Hof on February 10, 2008
Honestly, I don’t know whether Yahoo seeking to acquire AOL, as reported by the Times of London, is just a way to jack up Microsoft’s unsolicited bid, or a real, last-ditch bid for independence.
I suspect the former, because here’s the reality: AOL doesn’t really do that much for Yahoo. As TechCrunch’s Mike Arrington points out, AOL doesn’t have any search technology, minuscule search query share, and no search ad platform, since it uses Google to serve search ads. So it won’t be clear to Yahoo shareholders how this adds enough value to the company to outweigh the 62% stock price premium in Microsoft’s offer. There were reports in late 2006 that Yahoo had approached Time Warner on acquiring AOL, but if it didn’t happen then, I’m not sure why it makes more sense now except as a desperation move on Yahoo’s part.
Not to mention, it wouldn’t be cheap, because as HipMojo’s Ashkan Karbasfrooshan notes, Google’s 5% investment in AOL valued it at $20 billion. He doesn’t think it will happen. Nor does Rafat Ali at paidContent.org.
Microsoft must know all this, too, so I wonder how seriously it will take the threat. But at least Yahoo managed to come up with an option that few people had raised as a new possibility. So, maybe that along with the continuing threat, small as it is, of a search ad deal with Google, will force Microsoft to up its bid. But I still think these games won’t last too long. Unless several strange things happen, this is still Microsoft’s deal to lose.