Yahoo in Talks With AOL – Exactly What We Suggested

The Times Online is reporting this evening that Yahoo (YHOO) is in talks with AOL on a merger. We suggested this in 2007 and again in 2008 as a top potential acquisition for Yahoo. If we forget about Microsoft for a minute, the merger makes sense because it gives Yahoo a stronger position in "mainstream" advertising. Imagine the AOL client becoming a Yahoo client – there is enormous potential there from my perspective.

Update: Ashkan explains why this deal won’t happen. 

Most of the Times Online article discusses the Microsoft-Yahoo deal, but here is the paragraph that speaks to potential deal with AOL:

…One option being explored is to restart merger talks with AOL, the online business owned by Time Warner. Although Yahoo! and AOL previously failed to join forces because of differences over price, it is hoped that the urgency created by an unwelcome approach from Microsoft and an impending economic downturn will spur the two into new talks. Google, which offered support to Yahoo! when the Microsoft approach was made public, also has a 5 per cent stake in AOL.

I am not sure how the Google ownership piece would play into an acquisition, but the deal makes sense. Many CN readers said it couldn’t or wouldn’t happen because Google owns 5% of AOL.