Henry Blodget almost had me convinced today was April 1. His letter to Yahoo! (Nasdaq: YHOO) CEO Carol Bartz is that absurd. From the letter:

If this deal is going to work, the way it's going to have to happen is that you're going to have to buy Business Insider and then promote me to president of Yahoo. The good news is that I think Business Insider would be an excellent acquisition for Yahoo ... Once we plug Business Insider into Yahoo Finance, our traffic and revenue will explode, and Yahoo Finance's BI will become the world's most influential business publication. And buying us won't set you back much, especially relative to your massive cash hoard.

Translation: "Come on, Carol. AOL (NYSE: AOL) just spent $30 million to acquire TechCrunch, and my Business Insider blog network is worth at least that much!"

Tongue, meet cheek
To be fair, there's more than a clever pitch at work here. Blodget also makes some important points about Yahoo!'s advantages and weaknesses. He touches on two areas in particular: communications and content. Let's review.

Communications: Blodget argues that Yahoo! Mail has slipped in features and lost significant ground to Google (Nasdaq: GOOG), but that it's also not too late to right this wrong.

"Restoring Yahoo Mail, Messenger, et al, to their former glory will require immediately building the best integrated communications suite available -- one that integrates contacts, email, voice, instant-messaging, AND external services like Twitter and Facebook," Blodget writes.

He goes on to argue in favor of an AOL-Yahoo! merger, writing that combining the two would add scale and allow technology investments to have greater impact. (Fair point.)

My take: Much as I admire Blodget's pluck, AOL stinks at communications. Sure, AIM is a widely used service, but most techies I know already use the sort of integrated messaging platforms Blodget describes as ideal. Meebo and Digsby, for example. Plenty more use Gmail because it links together voice, chat, email, RSS, and productivity in a single screen.

Yep, that's my Gmail screen. Notice the links to other services at the top of the page.

Yahoo! hasn't challenged Microsoft (Nasdaq: MSFT) in productivity apps the way Apple (Nasdaq: AAPL) and Google have. And don't tell me this doesn't matter; communications platforms that don't offer either entertainment (i.e., Facebook), or productivity (i.e., Gmail) are worthless.

Content: Blodget calls Yahoo!'s content opportunity "extraordinary." To a degree, this is self-serving. He's arguing for a buyout of Business Insider, after all. But he's also not wrong. Facebook is the rare site that beats Yahoo! at the game of engaging visitors once they show up.

"Almost every traditional content production business on the planet is getting hammered by the world's shift to digital. It is beyond disappointing, therefore, that Yahoo has not moved more aggressively to amass control of the global digital content business," Blodget writes.

He also (rightly) points out that Yahoo! has the cash to make these purchases. The once and, if Blodget has his way, future dot-com king has produced more than $600 million in free cash flow over the past year.

My take: There are a couple of problems with Blodget's thesis here. First, Yahoo! has a lousy history when it comes to making investments. For most of the past five years, its returns on capital have mostly fallen.

Second, while it's clear from iPad usage data that digital holds promise, we've yet to see content heavies such as the New York Times (NYSE: NYT) enjoy a digital revenue renaissance. E-readers aren't remaking the content business as fast as we'd like.

We've seen this story before, and it's ended badly every time
Give Blodget double credit for writing a cogent thesis with a touch of humor. It's exactly the sort of thing we Fools like to see. But let's also not pretend that Yahoo! is in any position to catch or surpass Google in communications, and that content acquisition is part of some sort of cure-all. The Huffington Post may be good, but it's not that good.

And let's face it, we've seen Yahoo! acquire and aggregate content creators before. What's come of the strategy? Progressively lower returns on capital, followed by a widespread loss of shareholder wealth.

Now it's your turn to weigh in. Can anyone return Yahoo! to its former glory? Share your thoughts in the comments box below, and if you're interested in Yahoo!, click here to add it to your Foolish watch list.