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Yahoo to Buy Stake in Dailymotion

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According to the Wall Street Journal, Internet giant Yahoo! Inc. is in talks to acquire a 75% controlling stake in a leading French video website called Dailymotion in a deal roughly valued at $300 million.

Dailymotion was founded by Benjamin Bejbaum and Olivier Poitrey in 2005. It is a video-sharing website where users can upload, download, share and view videos. In 2011, France Telecom's Orange acquired a 49% stake in Dailymotion for €62 million or $170 million.

According to a comScore report, as of Feb 2013, Google’s YouTube tops  the list  with 150.7 million unique viewers, followed by Facebook (FB - Free Report) with 61.2 million. Microsoft (MSFT - Free Report) has 36.7 million unique viewers while Yahoo has 43.6 million unique viewers. Dailymotion occupies the #12 spot. Yahoo still has some way to go in this segment. The acquisition could strengthen its position and extend its reach, which could increase its position at advertisers.

Yahoo, under its new CEO Marissa Mayer is also beefing up its mobile business. The company has undertaken a new marketing strategy according to which it is acquiring struggling start-up companies. It has concluded four such acquisitions. Its recent purchases include Stamped, a mobile review app maker; OnTheAir, specializing in broadcasting video chats or interviews to online audiences;, which is a kind of clipping service for the web and Propeld, which is a location-based apps maker.

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.

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 revenues were 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).

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