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Yahoo (NASDAQ:YHOO) and AOL (NYSE:AOL) considering a possible merge

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The huge success of Google (NASDAQ:GOOGL) and MSN have left players like Yahoo (NASDAQ:YHOO) and AOL (NYSE:AOL) far behind. There was a time when Yahoo (NASDAQ:YHOO) and AOL (NYSE:AOL) shared a huge market share and were considered the best, but years have proven otherwise as many customers switched to Google (NASDAQ:GOOGL) or MSN. Such a scenario introduced the idea of a merger between the two struggling firms. A proposal at this stage is under speculation by investors, weighing the pros and cons of the potential merger.

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Even though it is believed that the coupling up could help them compete in the field of advertising but not many believe that it could in anyway make them the Internet giants, they once were.

According to Starboard’s analysis, an estimated saving of $1 billion could be expected.

Professor at the Ross School of Business, Eric Gordon believes that the companies on their own do not seem to be coming up with many earnings. However, combining them could at least guarantee cost saving.  But he also pointed out that bringing Yahoo (NASDAQ:YHOO) and AOL (NYSE:AOL) together, is not just combining two names – it includes shuffling the management altogether and also combining the staff and systems. All this would take up a lot of time and effort and could result in the companies falling even further behind in competition. The merger will no doubt make the firm cost effective but it’ll be at the expense of slow growth for the company. Is this really the type of benefit both the companies want to gain through each other?

Predicted results already indicate Google (NASDAQ:GOOGL) to take over, over one third of the $140 billion digital advertising; Facebook, just behind in line with 8 percent. This leave Yahoo (NASDAQ:YHOO) with a 2.5 percent and AOL (NYSE:AOL) going as low as 1 percent.

On the other hand, analysts are counting on Yahoo (NASDAQ:YHOO) and AOL (NYSE:AOL) to link up and bring about new ways of advertising through video programming, which they believe could be the key to success. AOL (NYSE:AOL) already has the latest electronic video advertising platform, which it purchased for $405 million. This could work in favor of the acquisition as Yahoo (NASDAQ:YHOO) has recently aimed its efforts on creating online videos about fashion, technology, sports and others.

Amy Dickerson, the vice president and director of Spark media agency believes the tie-up could create satisfying results for a combined audience. Resulting in Yahoo (NASDAQ:YHOO) and AOL (NYSE:AOL) standing third in line for advertising market after Google (NASDAQ:GOOGL) and Facebook Inc. (NASDAQ:FB).

Ever since AOL’s (NYSE:AOL) investment into programmatic advertising, its revenues have moved up 20 percent. AOL’s (NYSE:AOL) ad pricing has also been going up since then; whereas Yahoo’s (NASDAQ:YHOO) seems to be declining. AOL (NYSE:AOL), in general seems to be handling its core business much better as compared to Yahoo (NASDAQ:YHOO). Keeping all this in mind, it could be thought this could be fruitful for Yahoo (NASDAQ:YHOO) if the expected merger went through.

By tying up, it could prove more competitive to Google (NASDAQ:GOOGL), the world’s long standing number one search engine.

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