Internet giant Yahoo! Inc. (YHOO - Analyst Report) recently announced the acquisition of mobile advertising startup, Admovate. Financial details of the deal were not disclosed.
Mountain View, CA-based Admovate was founded in 2012. It focuses on mobile advertising technology that enable advertisers to create and deliver personalized offers to consumers through mobile platforms.
Being a little-known company, it’s not clear whether it has any existing products. But the acquisition stands out because these engineers are focused on the delivery of ads whereas the other were focused on content. After the closure of the deal, Admovate employees will join Yahoo's display advertising team at its California headquarters.
After CEO Marissa Meyer took over the reins of the company, Yahoo! 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; Snip.it, 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, PlayerScale, a gaming infrastructure company; photo app maker GhostBird Software; enterprise conference call service provider; Rondee, a mobile app developer; Bignoggins Production, amobile app developer; Qwiki Inc. and an email and address book management company, Xobni.
The acquisitions are part of a strategy to broaden and strengthen Yahoo!’s expertise in the mobile segment as adoption of mobile devices such as smartphones and tablets continues to accelerate. Through these acquisitions, Yahoo wants to offer apps with new features to attract more users to its website.
Also, with these acquisitions, Yahoo is picking up a whole lot of engineering talent as well as key technologies and products at a cheaper rate. These acquisitions can help Yahoo! enter the social marketing segment, where its rivals have already established themselves.
We are positive about Yahoo as its search business continues to show signs of improvement, even in the face of tough competition from Facebook, Google and Microsoft (MSFT - Analyst Report). Currently, Yahoo has a huge task at hand, which is to bring back its users and make them spend more time on its properties. This would be crucial in bringing back advertisers as well.
In the second quarter of fiscal 2013, Yahoo generated revenues of $1.14 billion, down 0.4% sequentially and 6.8% year over year. Traffic acquisition cost (TAC) was down 10.8% sequentially and 53.1% from last year. Excluding these costs in all periods, net revenue was essentially flat (up 0.3% sequentially but down 0.9% year over year), short of the consensus estimate.
Yahoo has a Zacks Rank #3 (Hold). Another stock to consider is SanDisk Corp. (SNDK - Analyst Report), which has a Zacks Rank#1 (Strong Buy).