Yahoo now wants AOL

Yahoo after its dismal performance in the last quarter is looking to buy AOL. According to a news report from Fortune, Yahoo had recently approached Time Warner about buying America Online. Yahoo had previously tried this deal about a year ago, but the talks had broken down midway. Previously there were reports that Yahoo has been looking to buy Facebook, however even that deal never materialized.

It seems Yahoo management is having tough time deciding which option to choose. Also it is not clear if either of the 2 companies themselves will like to be acquired by Yahoo who itself has been facing rough times.

Personally I don’t see how Yahoo and AOL will combine to overcome the problems each of them are facing right now. AOL which was bought by Time Warner few years back never proved a good investment for the company. There were quite a few news reports indicating that Time Warner wanted to dump AOL for good. Also AOL has been heavily revamping it’s operations and shifting to newer business areas, which will take at least 2 years to show results in terms of significant revenues. On the other hand, Yahoo had launched its new advertising platform, Project Panama, which is supposed to compete with Google Adsense+Adwords. It will be another 6-12 months before the real results start showing up for advertising network.

Also it is not clear what will be Google’s take on this deal. Google and AOL had entered into a deal last year in which Google had acquired 5% stake in AOL for $1 billion. As a part of the deal Google has providing exclusive Internet search capabilities to AOL search.

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