Displeased Yahoo Investors Seek AOL Deal – Report

Tom Jowitt is a leading British tech freelance and long standing contributor to TechWeek Europe

Yahoo continues its acquisition spree as unhappy investors look to AOL for a possible merger

Yahoo chief executive Marissa Mayer may not need to suffer any more unwelcome headlines after it was reported that two leading company shareholders have approached rival AOL over a possible merger.

The report, if true, highlights the ongoing battle Mayer has on her hands as she seeks to restore the fortunes of Yahoo.

AOL Merger

The report that “two top ten” Yahoo shareholders are so unhappy with Mayer’s reign that they have approached a rival in the form of AOL was revealed by Reuters, which quoted unnamed Yahoo investors as its source, as well as two sources close to AOL.

The shareholders reportedly made a direct plea to AOL CEO Tim Armstrong to explore a merger and run the combined company.

Yahoo searchThat plea comes amid an activist campaign by hedge fund Starboard Value LP, which is said to be urging Yahoo’s management to strike a deal with AOL and spin off its valuable Asian assets (most notably its stake in Alibaba and Yahoo Japan) into a separate company.

Yahoo currently has a market value of $47bn (£29.6bn), but its Alibaba stake alone is worth $44bn (£27.6bn).

AOL boss Armstrong was reportedly receptive to the Yahoo shareholders and acknowledged the potential benefits of a deal. However, there is no official talks between the two companies and Armstrong would reportedly only consider a friendly merger.

There was no official comment from either AOL or Yahoo.

Former Google executive Mayer has been in charge of Yahoo since July 2012, after previous CEO Scott Thompson was fired over including a non-existent computer science degree in his CV and regulatory findings.

Mayer inherited a company in bad shape, and over the next couple of years began a turnaround plan for the company, which led to the departure of a number of executives. Some of her decisions, including her personally reviewing every new hire after the candidate has been vetted by a team of colleagues, have been widely pinged by industry experts. Mayer also banned Yahoo staff members from working from home.

Acquisition Spree

Under her reign growth has remained elusive, but Mayer has managed to triple the value of Yahoo stock, but critics believe this was down mostly to its valuable 24 percent stake in Alibaba.

Mayer has sought to boost Yahoo’s growth with a number of acquisition deals. This includes the purchase of  mobile analytics startup Flurry in July to strengthen its position in the mobile advertising business. Earlier in the year, it also acquired mobile messaging start-up Blink to build out its mobile engineering workforce.

It has also previously purchased location-based advertising start-up Admovate, address book management application developer Xobni, automated video editing app developer Qwiki, and language recognition start-up SkyPhrase.

But her most significant acquisition was that of blogging platform Tumblr, which was bought for $1.1 billion (£725m) in May 2013.

And this acquisition spree shows no sign of slowing as it was confirmed that Yahoo is acquiring BrightRoll, which offers a programmatic video advertising platform.

Yahoo said the acquisition will accelerate its strategy, which is focused on search, communications, and digital content through growth in mobile, social, native, and video advertising. “BrightRoll will dramatically strengthen Yahoo’s video advertising platform, making it the largest in the US,” the company said.

“Video, along with mobile, social, and native, is driving a surge in digital advertising,” said Mayer. “Here at Yahoo, video is one of the largest growth opportunities, and BrightRoll is a terrific, strategic and financially compelling fit for our video advertising business.”

“As with every acquisition, we have been extremely thoughtful about our approach to the video advertising space,” she added. “This acquisition will accelerate the growth of both companies – we can help BrightRoll scale to even more advertisers globally and they can bring their tremendous platform offering to Yahoo’s advertisers. The combination builds positive momentum for Yahoo’s broader display advertising business in 2015.”

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