The One Thing That Makes The Idea Of Yahoo Acquiring AOL Look Not Totally Bonkers

APMarissa Mayer speaks at the Cannes Lions International Festival of Creativity.

We told you earlier that AOL CEO Tim Armstrong was spotted at a bar late at night talking to Yahoo CEO Marissa Mayer, and that this has led to speculation that the former is trying to sell his company to the latter.

Mayer isn't convinced, apparently, because it would be like merging too Old Internet brands into one - it's too backward looking.

However, there is one fact that makes "AOL-hoo" appealing. Despite AOL's legacy Web 1.0 business model - unbelievably, it still gets $150 million per quarter charging people for dialup access! - AOL actually has a growing ad business.

Unlike Yahoo, which has at best a stagnating ad business and, if you take the long view, an ad business that's in decline.

These two charts show what those businesses look like. They cover ad revenue only, and they don't address some important issues such as Yahoo's stake in various Asian online powerhouses such as Alibaba and Yahoo Japan. Below, we'll address some qualitative reasons why Yahoo might actually be helped by an AOL marriage.

AOL actually has an ad business that is growing nicely.

AOL

Ok, so AOL is not exactly blowing the doors off. Other online and mobile businesses are doubling revenues every year right now. But still. The ad business isn't easy, and AOL is still growing.

Yahoo's ad business leaves much to be desired.

Yahoo

How Yahoo has managed to miss the greatest bull market in online advertising, ever, is the topic of a different story. The point is, Yahoo is going nowhere when it comes to revenues.

Do these charts alone make the case? No.

But consider the context.

Mayer has had terrible difficulty turning around her ad business. She recently overslept at the Cannes Lions ad festival and missed a meeting with some of the top ad execs on the planet. She doesn't return messages left by WPP CEO Martin Sorrell, the man who controls the largest ad agency holding company on Earth. On its own, that is unfortunate. But these guys control billions in ad spending, billions that Mayer needs to get the core of Yahoo's business moving again.

Flickr/Eirik SolheimHenrique De Castro was also disliked by ad agencies.

Before that, Mayer had a COO named Henrique De Castro whose job it was to return the messages of important ad execs. He didn't do that either. (Mayer later fired him.)

It's an astonishing set of circumstances: Yahoo needs ad revenue desperately, yet its two most senior executives have had disastrous personal relationships with their clients.

And then there's Tumblr.

The social blog platform has been taking ads for more than a year now and Yahoo has yet to report a dime in ad revenue from its $1 billion acquisition. The company need not break out Tumblr's revenue unless it is "material" to its results under SEC regulations. And surely Yahoo is taking things slowly with Tumblr - it's an incredible platform whose users are addictively engaged. You don't want to ruin that environment.

But ... zero revenue after a year? Something's got to give.

So laugh all you want at "Yah-OL." But a merger would allow Mayer to put AOL's competent ad sales people in charge of both businesses, ax the useless bits, keep the good bits, and Yahoo's underlying core would finally show some growth.