When Google bought 5% of AOL for $1B, it set the stage for the impending acquisition of Yahoo! by Microsoft.

By buying 5% for $1B, Google effectively valued AOL at $20B.  As such, any subsequent deal involving AOL would have to be benchmarked to that metric.

But as Yahoo! and AOL considered merging, and Microsoft considered acquiring AOL, it was inevitable that Google would cause obstruction by showing interest, raising the bid, and then walking away… effectively killing the deal.

I am not saying this actually happened for sure, but this is a plausible storyline that any amateur strategist should have foreseen.  I wrote about this 2 years ago.

As a result, as AOL and Google would remain attached, albeit loosely, it set the stage for Microsoft and Yahoo! to play cat and mouse.  That Microsoft did so after Yahoo!’s horrible Q4 2007 earnings call (where I said it would be the most important earnings call in their history) against a backdrop of a troubling economy are details in the storyline.

This ending was scripted all the way back…

Read our initial take on the merger here.

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