A union of Microsoft and Yahoo would seem to imply that two of the most promising potential buyers of AOL are out of the market. Yet Oppenheimer & Co. analyst Jason Helfstein says a three-way combination could work.
Microsoft, Yahoo and AOL are the three leaders in e-mail, a part of the industry in which customers tend to stay put as long as it doesn't cost them much. So far, legions of loyal customers haven't added up to much profit because nobody has figured out how to monetize e-mail. Adding a lot of pop-up ads seems effective only at driving away customers.
If e-mail's Big Three became the Giant One, a possible route to profits would be more effectively tracking the movements of people who begin their Web surfing at their e-mail site, and using that data to target them for less obtrusive marketing pitches, Helfstein said. Such behavioral targeting is a developing arena for ad growth.
The question for AOL would be whether, even with that rationale, it could get an attractive enough price to satisfy Time Warner.
Some contrarians saw Friday's announcement as an odd kind of plus for Google. Yes, it would have to face a bigger rival, but between now and the time the deal got done, Microsoft and Yahoo would be more preoccupied with putting the two companies together here and abroad than with their arch-competitor. While they had their eyes off the ball, the argument went, Google could grab still more market share.
Analyst Laura Martin of Soleil Securities in Los Angeles wasn't buying that theory.
"There is nothing about a combined Microsoft-Yahoo that is good for Google," she said flatly. Its market share is already so dominant in the paid search realm that small gains resulting from its competitors' inattention are next to meaningless.
That doesn't mean the merger couldn't do some good for smaller Web-search rivals. Gartner's Weiner said now might be a good time for search also-rans AOL and Ask.com to pitch their services as both the anti-Google and the provider that isn't too distracted to get the job done.
thomas.mulligan@ latimes.com
