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AOL and Yahoo, fallen giants of the first age of the internet, are reportedly discussing a merger. The news comes after Yahoo axed chief executive Carol Bartz earlier this week.
AOL's chief executive Tim Armstrong has approached Yahoo's advisers to gauge its interest in combining the companies, Bloomberg reported. Armstrong has reportedly approached investment bankers from Allen & Co. who are working with Yahoo.
Yahoo announced this week that it was conducting "a comprehensive strategic review" after the decision to fire Bartz. She had been brought in to turn the company around but, while she cut costs by firing staff, she failed to grow Yahoo's huge but dwindling business.
Armstrong reportedly teamed up with several private equity firms to make an approach to Yahoo last year but was rebuffed by Bartz. Yahoo was courted by Microsoft in 2008 but rejected a $47.5bn (£30bn) offer. The firm was worth $80bn in its heyday and is now worth just over $17bn.
The firm is being outpaced by Google and Facebook but remains the most visited web portal in the US.
AOL, once the hottest name on the internet, is valued at $1.68bn and has lost almost $800m since it was spun off from Time Warner in 2009 as its lucrative dial-up internet access business has dried up.
Armstrong has tried to rebuild the business by buying content companies in the hope of building an attractive audience for advertisers. In February, AOL bought Huffington Post, one of the US's most visited news sites.
The talks come in a week of controversy for both firms. Bartz gave an angry interview to Fortune after being ousted, calling Yahoo's board "doofuses" and claiming they had "fucked me over".
AOL faced its own controversy after sacking Michael Arrington, founder of the influential TechCrunch blog that the company bought last year.
Arrington has set up an investment fund in which AOL is a major backer. The fund will target tech startups, TechCrunch's area of interest. AOL reacted in a confused manner to criticism that there was a conflict of interest between the fund and the blog's editorial independence. First, it denied any conflict, then said Arrington would not work for TechCrunch, then pushed him out.
Despite their downward trajectory, AOL and Yahoo remain huge players online and any merger is likely to trigger regulatory scrutiny.
AOL and Yahoo declined to comment.
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