While activist investors like Starboard Ventures LLC had advocated for an AOL-Yahoo merger, Verizon’s intent to purchase the former seems to have dampened that plan.
So where does that leave Yahoo?
“No different than they were before,” said Pivotal Group analyst Brian Wieser. “In a bad position.”
Not everyone has such dire predictions. Cantor & Fitzgerald equity analyst Youssef Squali wrote he believed the transaction could be positive for Yahoo by making it the last remaining large-scale digital media company of its kind.
The scope of the deal could start a chain of deals, Millard said, since the massive scale AOL will inherit from Verizon will threaten other players, including Yahoo.
“Scale really, really matters in this industry, and so does the ability to deliver the consumer across every possible platform,” said Wenda Harris Millard, president and COO of Medialink and the former head of sales at Yahoo.
She said the enormity of the Verizon-AOL deal doesn’t make Yahoo a target, but rather the acquirer.
“The question for Yahoo is what will it do to help redefine this landscape?” Millard said. “This has changed the competitive game like we’ve never seen. The classic competitors aren’t classic anymore. Tech companies are getting into the media business and media business is getting into the tech business.
Yahoo is already at a disadvantage. Technologically, Yahoo is about where AOL was in 2012, Wieser estimated. AOL had already gained ground by investing in growing areas: programmatic and video.
“What AOL can offer more quickly is scale around video and programmatic, and it’s investing heavily in its own content and production,” said Krista Lang, an SVP and executive media director at agency 22squared. “We tended to gravitate toward that.”
Yahoo, however, has also invested in content, and if Verizon decides to offload The Huffington Post Media Group, perhaps Yahoo could buy it, adding to its stable. Wieser doesn’t think highly of Yahoo’s content focus.
“They’ve invested far too heavily in content, which is the commodity asset,” Wieser said of Yahoo. “Buying AOL’s content assets would accelerate that wrong decision.”
During AOL’s earning call on Friday, Armstrong talked of wanting to be one of the top three players in the industry. That would mean shaking off close competitors like Yahoo and rising to the level of Facebook and Google.
And AOL’s struggle to compete with Facebook and Google could give Yahoo and other smaller players a shot.
“Facebook and Google are so far ahead in data and scale and non-cookie-based data,” Lang said. “And there are so many tier-two players trying to get to the No. 3 spot.”
