The rumor that AOL and some private equity firms have been in talks with Yahoo regarding an acquisition seems to be most rooted in the WSJ, but some insiders tell us that it’s true. They also say there are still some significant points of dispute on the proposed deal, and that the odds against success are still better than even.
At one level, something like this is inevitable. AOL and Yahoo are both brands past their prime, victims of change (in the first case) and competition and complacency (in the second). We think that’s the big issue here; we’ve got a marriage of inconvenience, a union being proposed where neither party brings really strong assets to the table. AOL died in all but the real sense when broadband replaced dial-up, and Yahoo is dying not only from Google but now from the fact that more users are abandoning search in favor of social networks.
The big revolution online is yet to come. Just as we didn’t want to be informed by the Internet when there was an entertainment alternative, so we don’t want to be social only while sitting in front of our computer. Appliances like iPhones and iPads are now driving the bus for the Internet’s future. Applications not only anonymize information, they anonymize the Net itself. You push a button and you get your answer; magic might as easily deliver it as search. We’re mashing social networks to increasingly look like SMS. In the drive to socially connect, we’re pulling everything that could be differentiable out of the process of being online.
Social networking and apps are their own worst enemies; they’re creating a world where there’s no room for billboards, and they’re funded by the expectations of those who want those billboards in everyone’s line of sight. This conflict will self-limit the whole social network process, and so invalidate anyone’s deal for Facebook. It will also reshape the market so thoroughly that older brands have no meaning, making the Yahoo/AOL alliance kind of like ignoring the lifeboat as the Titanic goes down and grabbing onto another drowning victim instead. All these guys need to examine the future more carefully, because the present is becoming the past.