With the dust settling around Microsoft’s abortive bid for Yahoo, one thing’s quickly becoming clear: The self-destruction of this particular takeover attempt is not the end of Yahoo’s odyssey but merely a mid-way point. Analyst and blogger speculation this morning has anticipated a variety of outcomes for Yahoo, including a deal with News Corp (though talks have reportedly “cooled”), an acquisition of ValueClick, and even a late third act consummation with Microsoft.
The next big Web company to sell may not be Yahoo, however. Last month we learned Yahoo was closing in on a deal to imbibe AOL. Presumably those talks are still underway, and word this morning is Microsoft has already entered the fray. Google may also be interested in AOL, which would give it the reach in display that has so far eluded it.
Microsoft seems the best bet to triumph in any competitive bidding process, given it’s already flashed its money roll to investors and the business community. Plus it really does crave search market share. And while AOL’s 5 percent wedge of the U.S. search pie is modest by comparison to Yahoo’s 21 percent, Microsoft could nearly match Yahoo by buying both AOL and Ask. Sweetening the deal for Microsoft, buying those two entities would would end Google’s ad distribution deals with them, cutting into its profits.
Additionally, any company to combine with AOL will command the display ad market. A combined AOL-Yahoo would be a true powerhouse, as the companies are #1 and #2 in display. A combined Google-AOL would create huge inroads into display for a company that’s so far still just barely out of lip-service territory in the category.