Yahoo to Merge with AOL?

It is a mistake to think of Yahoo! as competing for search dominance. As Yahoo! has reiterated several times at this point, their strategy is to become the starting point for the web, not the search engine. Search is only one tool web users need, and Yahoo! has no interest in being the place they come to for it. They would rather be the place people leave from, time and time again.

So, how does a merger with AOL help Yahoo!?

1) Yahoo! maintains its position as the top site on the web. Quantcast shows that adding AOL’s visitors to Yahoo!’s puts Yahoo! at almost 200 million monthly uniques, almost 50% ahead of Google. ComScore data is less exact, since it groups AOL under “Time Warner Network”, but still shows the same trend:

- http://www.quantcast.com/top-sites-1

- http://www.comscore.com/press/.....press=2000

2) Yahoo! becomes the dominant player in IM. Yahoo! Messenger is already interoperable with Windows Live Messenger; adding interoperability with AIM means that they control ~70% of desktop IM client market share(more recent numbers on this are needed, but by the end of 2006 AIM was ~50 million, and both Yahoo! and Microsoft’s were ~20 million), and their clients can talk to everyone else’s. Yahoo! and AOL have both made progress in integrating IM with E-mail, something Microsoft still hasn’t done. As Yahoo! expands its e-mail services into enterprise markets, and enterprises increase their usage of IM, this could be a big deal.

3) Much better integration potential than with Microsoft. After being stuck in Time Warner’s in-fighting old media bureaucracy for so long, I’d imagine that AOL employees would be overjoyed to be brought into an organization that understands and is about the web. There’s also excellent potential for brand integration here:

- Yahoo! is a brand AOL users would be comfortable with.

- It’s a brand that it makes sense for AOL to adopt as it’s been expanding overseas operations(where Yahoo! already has a strong presence).

- The Yahoo! brand offers a graceful way to retire a brand that the tech-savvy have long scorned.

- Go to Yahoo.com, then go to AOL.com. The portals are almost identical. It’s feasible that a full-scale integration of the two properties could at some point take place.

4) There are plenty of other reasons why an AOL/Yahoo! merger has potential. Concentration of content-provider partnerships, joint efforts in mobile services/advertising, online/offline music offerings, and the fact that both are much more youth-friendly brands than MSN or Google. Plus more.

But TechCrunch isn’t paying me to write guest posts in their comments, so that’s all for now.