Tuesday, October 05, 2010
AOL + Yahoo!: Cutting Losses
The writing on the wall has been clear for years. AOL and Yahoo! are just not the companies (or the web destinations) they used to be. But is the only hope for their survival a merger? It’s an interesting question for two players in an industry known for incredible turnarounds. But can consolidation really help these two internet stalwarts?
I the late Ninety’s, I left a job in the manufacturing industry to become a product photographer for 800.com, an early pure-play retailer of consumer electronics. As fast as it ascended from the wellspring of venture capital, it descended into oblivion when the VC’s wanted their money back. Amazon.com was our main competitor, but they weathered the storm.
At the time, consumer choice and awareness was blossoming especially in regards to how you could browse the internet. Back then, companies like AOL and Yahoo! happily lead all subscribers to beilive that AOL was the internet’s home page. Portals were all the rage. The big players of the day built suites of free and subscription services and in AOL/Netscape’s case, a branded browser, to closely align internet behavior with a single brand. New players—Social Media and Networking have our attention for now. So, would the absence of Yahoo or AOL really matter?
In an interesting article at the Huffington Post, Here’s Why Yahoo and AOl Should Immediately Merge, Henry Blodget lays out several reasons why these two struggling companies should merge. Here’s one that caught my eye:
There are currently 4-6 big generalist destination web sites, and that’s at least two more than there should be. The big destination sites are: Facebook, Google, Yahoo, Microsoft, and AOL (and, increasingly, Twitter). Facebook and Google have clearly differentiated businesses. Yahoo, Microsoft, and AOL don’t—they’re still trying to be all things to all people. By investing hugely in Bing, Microsoft has picked its horse: It wants to compete with Google in search. Yahoo and AOL, meanwhile, have outsourced search to focus on content and display ads. That leaves Yahoo and AOL as the major competitors in content and display advertising. They both would be stronger—and they both would eliminate a major competitor (in the US)—if they combined forces.
For major investors, Blodget’s reasons would make sense. Consolidation is good, it means fewer competitors. But are the content consumers AOL and Yahoo covet, really looking for the content they deliver? Well, of course, but they look for specialized content and find it through different means.
The problem is that the general content found on the front page of AOL and Yahoo!, can be found in a thousand and one other places. To its credit, AOL, does create much of their own content, but you just wouldn’t know it. If you don’t need Yahoo or AOL email services, you might not have any need for either site.
For instance, I love the work Yahoo! have done for developers and specialized interest groups—its the only reason I ever go to Yahoo! AOL is and has been completely irrelevant for the last ten years. If only these two sites would focus on what’s relevant to the viewer, they might have a chance, otherwise they will remain on the margins of internet culture.
For contrast, take a look at the Twitter homepage and look for content. See any? No, at least not in the classic sense—the sense that AOL and Yahoo! views content. In fact, you might not seen anything remotely like content, until Twitter is viewed from another angle. But even though Twitter may not have headline news, it has the capacity to disseminate the news through the Twitter community via Tweets. This capacity is well noted on nearly every news site that has a social media bar of links to Twitter, Facebook, Reddit and a host of other aggregators—just look at the bottom of this page for an example.
Wouldn’t it be interesting to know just how much traffic to AOL and Yahoo! is actually referred from Twitter and Facebook. Again, there is a lot of competition in the news market, for example. Since AOL and Yahoo! don’t collect the news themselves, (they use news syndications services like Associated Press) other sources of news are closer to the referral power of Tweets. Thus, the draw of their services must be what supports their portal. Again, if you don’t already have a good reason to go to either, then chances are you won’t. In short, consolidation may not help.
Like 800.com and thousands of other .com businesses, life goes on when they disappear. Twitter and Facebook didn’t replace an existing business model, or an existing viewer model—they created new markets and new model of interaction for viewers. AOL and Yahoo! just have nowhere to go but away.
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