Yahoo (NASDAQ:YHOO) is in the middle of a recovering process from years of troubled corporate governance, a wrong social media strategy, and a lack of mobile presence. The Internet company has made a few major acquisitions lately that are targeted towards getting the company back in the front line of the tech giants. Yahoo has acted in all areas in order to close the gap from its competition. Yahoo bought the microblogging site Tumblr to support its social media offering, purchased RayV, collaborated with Live Nation to support its online streaming offering, and acquired what was later shifted into a standalone Android home-screen app that Yahoo launched with the same name.
In an earlier article covering Yahoo's earnings release, I mentioned that on top of the above focused areas, Yahoo also focuses on developing its digital magazines and offering broader, quality content than the existing content on its websites. Digital magazines are Yahoo's strengths, and the company has already proven that it can deliver quality content, such as Yahoo Sports, Yahoo Tech, and Yahoo Food, to name a few. The logic behind expanding digital magazines is that Yahoo should leverage its strengths to drive more traffic into its services and, as a result, increase ad revenues. If Yahoo could leverage the traffic in its digital magazines to drive more traffic to its other services, the company could generate additional ad revenues from Yahoo search engine and social media.
Yesterday, Yahoo announced another acquisition in the mobile turf that could highlight the change the company is going through. Yahoo announced that it had acquired the mobile ad and analytics company, Flurry. Flurry offers a platform for analyzing consumers' behavior in mobile apps, which enables advertisers to optimize their mobile ads and assists companies in monetizing their mobile services. Flurry has an extensive network of customers and users. The company sees app activity from 1.4 billion mobile devices, and works with mobile developers in 150 countries around the world.
Flurry's acquisition will allow Yahoo to do two things: to monetize its own mobile services, increasing ad revenues from its mobile apps, and to sell ads through Flurry's infrastructure to the more than 8000 apps that Flurry has deals with.
The first element of the acquisition is that Yahoo will be able to use Flurry's services and infrastructure to generate revenue from its mobile apps. Combining Flurry's abilities in the mobile market together with Yahoo's investments in digital magazines, content, and online streaming enables Yahoo to monetize its new services and increase mobile revenues. The ability to generate revenues from the new initiatives is important to the company not only finance-wise but also PR-wise.
The second element of the acquisition is that Yahoo will enter the mobile advertisement market and compete with Google (NASDAQ:GOOG) (NASDAQ:GOOGL), Facebook (NASDAQ:FB), and Twitter (NYSE:TWTR). Simon Khalaf, Flurry's CEO, said to the New York Times that many small app developers rely on his company's demographic data about their users to present to advertisers. Yahoo could leverage its position and connect between advertisers who currently advertise on Yahoo's apps to app developers.
The acquisition of Flurry allows Yahoo not only to increase its potential revenue from its own mobile apps but also to enter the mobile advertisement market. In my opinion, this is another evidence of the change Yahoo is going through and another step in the process to get back to the front line of tech giants.
Disclosure: The author is long YHOO. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.
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