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Internet giant Yahoo! Inc. (YHOO - Analyst Report) recently announced its acquisition of photo app maker GhostBird Software. Financial details were not disclosed.

Toronto, Ontario-based GhostBird Software was founded in 2008 by former Electronic Arts Inc. (EA - Analyst Report) employees, Travis Houlette and Ye Lu. GhostBird Software is the creator of the photo-editing apps, KitCam, PhotoForge and PhotoForge2 for Apple’s (AAPL - Analyst Report) iPhone.

The KitCam app facilitates photo capturing through the adjustment of different lenses and filters in the mobile setting. It also allows manual selection of balance and exposure. The other app, PhotoForge allows users to modify the pictures taken through image resizing, cropping and metadata editing among others.

After the acquisition, apps from GhostBird will not support new versions of Apple’s iOS. However, users who have already purchased the apps will able to re-download them from iCloud.

Yahoo’s acquisition makes sense, as the Internet giant will use the apps to enhance Flickr, an image and video hosting and photo-sharing website. Yahoo acquired it in 2005 and redesigned it in May 2013. Flickr was losing favor among users due to other sites such as Facebook (FB - Analyst Report), Twitter and YouTube where users uploaded and shared images and videos.

The GhostBird acquisition follows that of blogging and social networking site, Tumblr, for $1.1 billion. After CEO Merissa Meyer took over the reins of the company, it has been quite active on the acquisition front. Some of its recent acquisitions include Astrid, a task-management app maker;Summly, a news-condenser app maker; Stamped, a mobile-review app maker; OnTheAir, which specializes in broadcasting video chats or interviews to online audiences;, which is a kind of clipping service for the web; Propeld, a location-based apps maker; Jybe, a social recommendation site, Loki Studios, a mobile gaming start-up and PlayerScale, agaming infrastructure company.  

We believe that these acquisitions are a part of its strategy to boost its offerings in mobile devices, video, and personalized digital content. Currently, Yahoo has a huge task at hand, which is to bring back its users and make them spend more time on its properties. If successful, Yahoo may reclaim some of its lost market share going forward. This would be crucial in bringing back advertisers as well. 

In the first quarter of fiscal 2013, Yahoo generated revenues of $1.14 billion, which were down 15.3% sequentially and 6.6% year over year. Traffic acquisition cost (TAC) was down 42.3% sequentially and 49.9% year over year. Excluding these costs in all periods, net revenue was down 12.5% on a sequential basis and 0.8% from last year, short of the consensus estimate.

Yahoo has a Zacks Rank #2 (Buy).

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