Yahoo in talks to combine with AOL
By Azam on April 9, 2008Yahoo and Time Warner Inc.’s AOL are close to striking a deal to combine efforts in their Internet operations, according to a WSJ report in an article citing individuals familiar with the situation
Under the proposal, Time Warner would fold its AOL unit into Yahoo and make a cash investment in return for about 20% of the combined entity with a valuation of 10B, excluding the AOL dial up internet connection service. Also, Yahoo would use the Time Warner cash and additional funds to buy back several billion dollars worth of its own stock at a price somewhere in the middle of the range between $30 and $40 a share, the individuals close to situation mentioned.
Yahoo earlier announced testing search Ad with Google Adsense to search results to see if the company could enhance revenues derived from search. Yahoo test with Google will involve no more than 3% of Yahoo’s Web search queries. The test is designed for Google and Yahoo to evaluate the revenue potential of a broader search advertising sales outsourcing arrangement. Google previously mentioned a proposal to offer search advertising on Yahoo to offer alternative to counter a Microsoft bid. Google currently handle search advertising on AOL properties and own a 5% stake in AOL as part of the deal between the two companies.
“Yahoo will be testing Google’s AdSense for Search service, which will deliver relevant ads alongside Yahoo’s own natural search results,” said Google in a statement. “This is only a limited test and does not necessarily mean that Yahoo will join the AdSense program.”
Microsoft recently announced in official letter to Yahoo its intention to bring the bid proposal offered to Yahoo to share holders and stated that current offer may be reduced, due to market conditions, if Yahoo does not enter into negotiations within 3 weeks. Microsoft initially offered 44B for Yahoo in combination of $31 cash and share in Microsoft. At the same time, Microsoft offer has declined in value for Yahoo shareholders: the current combination of cash and Microsoft shares is valued at $42 billion, or $29.24 a share.
Yahoo directors responded in a letter by rejecting offer as too low and remained open to a combination that would fully value Yahoo. The Yahoo letter described the ultimatum in the letter received from Steve Ballmer as counterproductive.
Microsoft reported dismay to any Yahoo deal with Google in search advertising anticompetitive due to Google dominance in the field of search advertising and Yahoo dominance in display. Microsoft efforts to acquire Yahoo are in response to the challenge the company is facing against Google. Microsoft lags behind in search and display advertising despite efforts and acquisitions made to strengthen its position.
Any definitive agreement between Yahoo and Google would consolidate over 90% of the search advertising market in Google’s hands,” said Microsoft in a statement. “This would make the market far less competitive.”
Microsoft’s statement added, “Our proposal remains the only alternative put forward that offers Yahoo shareholders full and fair value for their shares.”
A final agreement would be offered to Yahoo shareholders for approval, the Journal said, citing the unidentified people.
Yahoo’s sites had the most U.S. visitors, with 136,767 M, Google 135,970 M, Microsoft 118,335 and AOL’s 109 M 108,911visitors put it fourth behind Google and Microsoft, according to research firm comScore Inc.
Categories : Media & AdsTags : AdSense, AOL, Display Advertising, Google, Microsft, Search Advertising, WSJ, yahoo