Yahoo! Inc. (YHOO - Analyst Report) recently announced the acquisition of Propeld, a developer of mobile apps with a social relevance for an undisclosed amount.
Seattle-based, Propeld is the maker of an app called Alike for Apple Inc.’s (AAPL - Analyst Report) iOS. The app displays location-based information like restaurants, bookshops and coffee shops around the user and recommends new places to visit based on his preferences. Thus, it acquires data from social networking sites such as Facebook (FB - Analyst Report), Twitter, Google Inc.’s Google+, and recommends nearby restaurants and other places which might be of interest to its consumers.
Following the acquisition, the Propeld team will be working with Yahoo’s mobile division. The company will shut down its existing app for the iPhone and other web apps.
Yahoo is marching ahead with its plan to acquire struggling start-up companies. Its recent purchases include Stamped, a mobile review app maker; OnTheAir, specializing in broadcasting video chats or interviews to online audiences; and Snip.it, which is a kind of clipping service for the web.
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 could help Yahoo get into the emerging social marketing segment, where its rivals have already established themselves.
The acquisition of these small start-up companies is a part of Yahoo’s strategy to strengthen its mobile offerings as it has lost its leadership position in display advertising to Facebook and Google. With search advertising revenues on a decline not only because of Google but also Microsoft, Yahoo needs to focus on other major growth markets and emerging geographies.
In the third quarter of fiscal 2012, Yahoo generated revenues of $1.20 billion, which were down 1.3% sequentially and 1.2% year over year. Traffic acquisition cost (TAC) was down 17.7% sequentially and 22.2% from last year. Excluding these costs in all periods, net revenue was essentially flat on a sequential basis and up 1.6% from last year, in line with the consensus estimate.
Yahoo has a Zacks Rank #3 (Hold).