Yahoo Buys Fifth Start-Up Jybe

Internet giant Yahoo! Inc. (YHOO - Analyst Report) recently announced the acquisition of Jybe, a social recommendation site for an undisclosed amount.

Founded in 2011 by ex-Yahoo! employees including Arnab Bhattacharjee, former VP of Yahoo! Search Technology, Jybe has developed an app for Apple’s (AAPL - Analyst Report) iPhone that recommends books, movies and restaurants based on user preferences stated on social networking sites.

Following the acquisition, the Jybe team of 5 members will be working with Yahoo. Jybe will shut down its existing app for the iPhone and other web apps and the technology will be integrated into Yahoo’s other products.

Yahoo is marching ahead with its plan to acquire struggling start-up companies. Its recent purchases include 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 and Propeld, a location-based apps maker.

The acquisitions are a 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.

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 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 (FB - Analyst Report) and Google (GOOG - Analyst Report). 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).