Last week, Alibaba went public, outperforming even their own projections. While the record-breaking IPO made a lot of money for employees of the company, a lot of early investors got a big payday as well. One of those early investors was Yahoo, who banked $6 billion from its holdings. For public companies like Yahoo, with money comes hedge funds who have ideas how to spend it.
Hedge Fund Starboard Value wrote to Marissa Mayer, giving her ideas on where she should take the company next; particularly what she should do with the newfound Alibaba money. While Marissa has done a pretty great job of turning around the company, including an ongoing battle for the top visited domain with Google. She has done this by consistently looking for new companies to add to the portfolio, and existing properties to bring back to relevance.
Of all of the ideas pitched, the most intriguing is the purchase of AOL. While it might seem like purchasing an Internet relic, there are a couple reasons why this might just work. First, Mayer has proven herself an expert at reviving relics, such as Flickr. While Time Warner had no success with the brand, Mayer might be the one that could turn it around and make it a viable brand again. Failing that, she could use the expertise of AOL to bolster Yahoo's relevance.
That leads us to the second point. AOL has one area in which they thrive: news and video. Coincidentally, Yahoo is in the process of amping up their offerings on both of these areas. For example, they recently added Katie Couric as the face of their news team, hoping to increase homepage relevance. In addition, they have been really focusing on video, with live concert streaming, Saturday Night Live syndication and talk of a YouTube competitor.
Marissa Mayer responded, rather broadly, saying,
Going forward, we have great confidence in the strength of our business. The management team and the board of directors remain committed to building value for all shareholders through the continued execution of our strategy, investing in products that will drive sustainable growth: search, communications, digital magazines and video.
With a focus on video, and AOL's relatively high success rate in the video arena, this might just be a proper match.