When Yahoo! Wishes Upon a Star

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Mickey Mouse is bleeding purple today.

Yahoo! (NAS: YHOO) and Disney's (NYS: DIS) ABC News are teaming up on a digital news and information alliance that will make the most of Yahoo!'s online reach and ABC's global reporting prowess.

The two media giants are no slouches on their own, but they combine to reach 100 million people in the U.S. each month -- roughly a third of the country --online.

How will these two behemoths work together? Well, you can see it right now. GoodMorningAmerica.com was relaunched this morning, redirecting to a new URL at gma.yahoo.com where news stories are updated around the clock.

Each company will do what it does best, but there will also be some proprietary content to keep audiences routinely checking back.

Yahoo! has wrestled between the models of generating its own content or leaning on third-party providers. It gets to do a little bit of both here.

There is plenty at stake here. Once it unloaded a few enterprise-facing assets and agreed to outsource its search business to Microsoft's (NAS: MSFT) Bing, the pressure has been on to increase its important display advertising business. However, it was flattish performance in display during Yahoo!'s most recent quarter that likely led to the ouster of Carol Bartz as CEO last month.

Yahoo!, AOL (NYS: AOL) , and Demand Media (NYS: DMD) have taken different approaches to content creation, but the end result for investors has been largely the same. AOL and Demand Media are trading near their 52-week lows. Yahoo!'s has fared better lately, but largely on the growing buyout chatter.

The deal with ABC News is still a smart one for both companies. Yahoo! gets to associate with a marquee news reporting brand, while Disney gets to maximize its exposure through the Internet leader in the news categories that matter.

Disney has been a rumored buyer of Yahoo! for years. An acquisition no longer makes sense, and the corporate culture at both companies will be grateful for that. An alliance is the right move for both companies. Anything else would just be flat out goofy.

If you want to follow the Yahoo! saga closely, add Yahoo! to My Watchlist.

At the time this article was published The Motley Fool owns shares of Yahoo and Microsoft. Motley Fool newsletter services have recommended buying shares of Microsoft, Yahoo!, and Walt Disney. Motley Fool newsletter services have recommended creating a bull call spread position in Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story except for Disney. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

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