Amid the hoopla surrounding the AOL-Huffington Post deal, some analysts and bloggers have started asking: “Why didn’t Yahoo buy the Huffington Post?” And their answer, in essence, is that even when it does nothing, Yahoo can’t get it right.
My answer: It shouldn’t have. In this case, I think Yahoo made the right call.
Still, the question is not unreasonable. For a number of reasons, AOL and Yahoo are now joined at the competitive hip, and the moves of one are destined to be analyzed in terms of what they mean to other.
In part, that is because of rumors last fall about AOL working on a complex deal with some private equity funds to acquire Yahoo. This was never confirmed, and I always figured it was a red herring, since Yahoo, even with its challenges, is worth about 10 times as much as AOL.
But that rumor had credibility because the two companies seem to be locked in an arms race to rebuild themselves as massive content portals.
There’s another connection here: Rumors last summer that Yahoo was in talks to buy the Huffington Post. And so, a new narrative emerged Monday: Slow-footed Yahoo couldn’t seal the deal where swift-footed AOL swooped in and bought one of the Web’s hottest properties.
“This was Yahoo’s deal to lose, and they lost it,” said Lou Kerner, a social media analyst at Wedbush Securities. “They can’t move at the pace that is necessary in the new economy.”
Yahoo would not comment on the AOL deal.
However, a source close to the company confirmed that Yahoo did take a look at a possible deal:
“The Huffington Post reached out to us last summer saying they had received an offer and would we be interested in making a bid,” said the source. “And based on what they had as an offer from someone else, we took a look and decided that it didn’t make sense to pursue.”
I emailed the Huffington Post for comment late Monday, but didn’t receive a response before deadline.
My source didn’t know the terms of the deal, or the identity of the bidder from last summer, so we don’t know how that compares to what AOL is paying.
But it does seem to confirm, as has been speculated, that the Huffington Post was eager to sell. That has been the conventional wisdom since the company moved one of its largest investors, Eric Hippeau, into the CEO slot back in 2009.
Interestingly, Hippeau has also been on the Yahoo board since 1996. But not for long. He announced over the weekend he was stepping down, presumably because the AOL deal with the Huffington Post was going to create a conflict.
Whether you think Yahoo should have outbid AOL at any cost, and whether this is another mortal wound for the company, largely depends on how big of a fan you are of the Huffington Post.
Kerner, for instance, argues that Yahoo should have bought the company no matter what it took.
“The Huffington Post is amazing,” Kerner said. “I’ve been talking about the Huffington Post as the best example of a company that really understands the connection between content and social networking. They get it better than any non-social networking company.”
But there are plenty of skeptics who think AOL may have overpaid for a company that just became profitable this year. I’m one of them. So, apparently, is former AOL CEO Steve Case, who tweeted that AOL CEO Tim Armstrong’s claims that the new deal would have lots of synergy echoed similar wishful thinking that surrounded the infamous AOL Time Warner deal: “AOL to Buy Huffington Post; Tim Armstrong says ‘1 + 1 will equal 11’ Really? That wasn’t my experience.”
While Yahoo certainly has its challenges, it’s still doing better than AOL, which in a far more desperate place. AOL is unprofitable, and has been losing display advertising market share and traffic. By comparison, Yahoo’s display advertising has been growing by double digits each of the last four quarters.
In the turnaround battle between these two giants of yesteryear, it’s AOL that’s more desperate. Yahoo still has a long way to go, but this was one deal it could afford to pass on.
Contact Chris O’Brien at (415) 298-0207 or cobrien@mercurynews.com. Follow him on Twitter at http://twitter.com/sjcobrien and read his blog posts at http://www.siliconbeat.com.
