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YAHOO AND AOL UNDER PRESSURE TO MERGE

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YAHOO AND AOL UNDER PRESSURE TO MERGE

Sept 29 2014, 3.34pm GMT

Stock.com

Yahoo (YHOO) and AOL could become the third strongest company in the market for display advertising if they merge. This is the benefit that activist investors Starboard are seeking as they urge the two companies to find common ground.

Under CEO Tim Armstrong, AOL bought the video advertising platform Adap.tv for $405 million last year. This led in part to a 20 per cent increase in advertising revenue in the last quarter. AOL’s ad pricing is also on the rise, gaining more revenue per ad. Add this increased return to Yahoo’s content and audience and the combination could take the two companies beyond their current independent market shares.

$140 billion is the current annual global market spend on digital advertising and of the four main players, Google Inc takes the lion’s share of over 30 per cent. Facebook is second with approximately 8 per cent, Yahoo has 2.5 per cent and AOL has less than 1 per cent.

AOL and Yahoo could follow the major players of Google and Facebook in their one-stop strategy for advertisers, by employing AOL’s facility to automate buying and selling of adverts. They could also use AOL’s Adap.tv to deliver Yahoo’s promise to their audience to supply more online video content.

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