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If AOL, Yahoo merge—who would be the best CEO?

AOL and Yahoo are both struggling to stay relevant in the face of building competitive pressures. Neither company at this point has found a recipe to reverse its business declines. The investment fund, Starboard Value, suggested this week in an open letter to Yahoo that they should combine together with AOL.

Marissa Mayer and Tim Armstrong.
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Marissa Mayer and Tim Armstrong.

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Let's say hypothetically that a merger takes place. Who might run AOL/Yahoo? Will it be the cost-cutter, Tim Armstrong, who has increased AOL's stock price because of reduced expenses and stock buybacks? Or will it be Marissa Mayer, who is attempting to turn Yahoo around by acquiring companies designed to increase user engagement to spur advertising sales?

Bold action is needed; incremental changes are not enough. Ms. Mayer and Mr. Armstrong have each taken actions that some might consider bold.

Yahoo has acquired many companies, including Tumblr, as a way to spur user engagement to fuel ad sales. Yahoo was roundly criticized by Starboard Value for the company's acquisition spree. So far, the payoff is not there for Yahoo.

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Ms. Mayer is fully aware that Yahoo's advertising fortunes will be positively influenced by adopting a new tech web advertising strategy desired by advertisers, an offering called programmatic advertising. In an Adweek article from late last year, Peter Naylor, a former EVP at NBCUniversal, states, "Programmatic is a catch-all term that many people are using to categorize everything from behavioral and intent-based targeting to real-time bidding and exchange-based buying of inventory. Programmatic is advertising's newer, better mousetrap."

Ms. Mayer has moved Yahoo's ad sales efforts towards this new paradigm. She is adapting to the marketplace and that's a positive sign.

Tim Armstrong bought the Huffington Post, which is the current jewel in AOL's property crown. Of course, Huffington Post is still is not a money maker for AOL at this point, despite projections that, by 2013, Huffington Post would make a profit of $66 million (according to Mr. Armstrong). Additionally, there have been notable failures for AOL including the Patch network of local news sites, which was eventually sold off to a tech investment firm.

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Merging two flawed companies will not guarantee success even if synergies and cost savings are captured. The resulting company might be more efficient but still must contend with competitive forces in the marketplace. So, as for AOL/Yahoo merger, I don't really see how it solves AOL or Yahoo's problem.

If they do merge, however, it is my view that, between Marissa Mayer and Tim Armstrong, Ms. Mayer would be the better choice to move these companies forward. She is clearly shaking things up at Yahoo despite its flagging results and one can see her attempts to focus Yahoo's strategy. The results aren't there yet; we shall see if her business path is one that succeeds. But she is staking Yahoo's future on a vision combined with decisive action and that's what the company needs. That's what AOL desperately needs as well.

A combined company of AOL and Yahoo would need a bold master plan; the competitive landscape demands it. The clock is ticking. Cost cutting and synergy won't be enough.

Commentary by Michael A. Yoshikami, the CEO and founder of Destination Wealth Management in Walnut Creek, California. He is also a CNBC contributor.

Disclaimer: Neither the author nor Destination Wealth Management own shares of AOL, Yahoo or any of the other companies mentioned in this article.

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