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Yahoo! and AOL five years later – this time it’s nowhere near as important

Just think of the first generation search and portal businesses, as if they were PC companies thirty years ago and it all kind of makes sense

By PETER WHITE

Published: 9 December, 2010

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Just think of the first generation search and portal businesses, as if they were PC companies thirty years ago and it all kind of makes sense. AOL and Yahoo may strip out useless assets and then merge, says a Reuters piece this week, citing insiders. Pretty much what happened in the PC era which resulted in just Hewlett-Packard, Dell and IBM-Lenovo surviving the early rounds, and extending the war into other technologies, before second generation PC makers like ASUS, Acer, Toshiba and NEC made an entry.

Many of the major portals have now given way to the dominance of Johnny-come relatively-lately, Google, which obviously now dominates the search business, but which is also extending out into other platforms, in order to extend search – on to mobile, tablets, netbook operating systems and cloud based apps.

The shape of the PC industry, along with many others, shows a classic shape of a pure market. More and more people see the benefits of using the market leader, which leads to weaker players and they want to merge for safety and strength – Compaq with HP, and then DEC with HP in the PC market back then, and now AOL with Yahoo in the portal market.

What’s strange is the way so little is risked in the process. Every time you get a new PC you decide whether nor not to import your old bookmarks to a browser, or start again – and this rare occasion is when web sites have the potential to lose a long term visitor. Personally at Faultline we look for share prices and market capitalizations of US public companies on the Yahoo finance site and have done for at least 15 years. What would it take us to change to another site? Well every time they make changes to the site it annoys us and we look for a replacement, but so far haven’t found it, so it would just take a good replacement, but specifically at a time when our favorite makes changes. And this is the reason why Yahoo and AOL so rarely makes any kind of change to their multitude of services – fear of losing existing visitors.

It’s not like a search engine, especially not with a browser bundled search bar linking to it. Sure search is part of what they do – AOL search is powered by Google, and Yahoo Search, although it has its own search technology, uses Microsoft to sell and serve its search advertising. Even together with a new unified search mechanism, they are both far more than a search engine.

AOL is the company which is more used to change, but only because it was a paid portal, which had to move into the free internet era by switching to advertising driven services as recently as 2005. Prior to that it was a source of utter bafflement to us that AOL ever got off the ground in the first place. AOL customers used to pay to see a tiny chunk of the internet, the AOL walled garden version, that was never going to be a long term plan, but it has survived intact for far longer than it deserved, almost a decade. But in its heritage is a business which believes in foisting its view of the world on its customers, for longer than it makes sense. Not good for an internet company, although in the last five years perhaps it has changed its spots.

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