Yahoo should buy Twitter (and then merge with AOL)

Hola Todos!

I’m going to be honest here.  I am getting tired of the “Who is going to purchase Yahoo?” talk.  It’s be an on and off again headline for too long (for instance, click here).  Its like Yahoo is waiting for a “White Knight” to save them from their strategic nadir.  Well, my crazy idea of the day is for Yahoo to save itself and to buy Twitter (e.g., give Twitter an offer they cannot refuse).

Two questions you might be asking yourself right now are HOW and WHY.  The HOW is the easier of the two and believe it or not, Yahoo can accomplish this maneuver without lifting a penny off of its balance sheet.

I was reading The Wall Street Journal the other day and what I learned that Yahoo owns a 40% stake in the Chinese e-commerce company Alibaba Group Holding Ltd (click here). Through something I know nothing about called a “cash-rich split-off,” Yahoo can sell its stake in Alibaba, recently valued by Yahoo at about $14 billion, and avoid paying taxes on the profit from a sale (e.g., a tax savings of about $5 billion).

Twitter could be persuaded to take an all cash offer (with benefits) given their current situation and what’s happening in the marketplace.  I do not care what Twitter’s “potential” evaluation could be, Twitter is not IPO ready, does not have a significant revenue generating model, and the stock market will NOT to be ripe for tech IPO for quarters to come.  Give Twitter $3 or $5 or even $8 billion in cash now because who knows if they will get it in the future.  Then, Twitter can concentrate of what it does best without worrying about developing a revenue-generating model that Wall Street will accept.

As for the WHY – first, Yahoo can use Twitter to increase page views of their sites.  Yahoo’s strength is display advertising.  Yahoo can only increase rates for display advertising if they gain more eyeballs.  Twitter can act as the highway to draw more eyeballs to Yahoo properties.  Done.  Second, Yahoo needs leadership.  Twitter has the executive talent to run Yahoo.  In addition, with Twitter’s brand, Yahoo will be able to attract and keep talent as opposed to losing everyone to Apple, Google and Facebook.

The final maneuver would be for Yahoo/Twitter to merge with AOL.  Like Yahoo, AOL strength is display advertising.  Yes, Twitter can also act as the highway to draw more eyeballs to AOL properties but more importantly, a Yahoo/AOL is a much stronger display advertising play for marketers then either Yahoo or AOL by itself.

The new entity – YAT Inc. or TAY Companies (you have fun with anagrams) – will be powerful enough to be a player, as opposed to an also ran, in today’s marketplace.

So what do you think about that?

Best

Dr. Dan-o

One thought on “Yahoo should buy Twitter (and then merge with AOL)

  1. Pingback: Twitter is Trying to Create a Revenue-Generating Model

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