Media

3 reasons Yahoo should get together with rival AOL

Yahoo! CEO Marissa Mayer has good reason to hook up with Tim Armstrong’s AOL.

Mayer was spotted having a long chat with Armstrong at last week’s tech and media mogul meet-up in Sun Valley, Idaho, sparking speculation that the two could be talking about a merger.

While her track record of acquisitions like Tumblr suggests she’s more interested in younger, hotter companies, Mayer shouldn’t dismiss an alliance with the aging Internet pioneer, investors say.

With her two-year anniversary as CEO around the corner, Mayer is feeling the pressure to come up with a fresh catalyst for the stock — and a tie-up with AOL could do the trick.

Here are three reasons why a merger with AOL would make sense for Yahoo:

  • AOL has tax losses stored up that would work well to offset the gains Yahoo is expected to record when it sells a portion of its majority stake in Chinese e-commerce giant Alibaba as soon as next month.
  • A merger will allow Yahoo to cut costs by laying off staff, specifically in the ad-buying space. AOL has been a leader in the programmatic ad buying technology, which allows it to more efficiently and cheaply match ads to content.
  • Ad revenues for AOL, which owns a slew of media properties including the Huffington Post, are growing at a faster clip than Yahoo’s. Mayer, meanwhile, is making a big push in the online news space, including the recent launch of several online magazines and hiring Katie Couric as global news anchor.