Internet giant Yahoo! Inc. (YHOO - Analyst Report) recently announced its acquisition of Summly, a news app for which Yahoo paid $30 million according to AllThingsD.
Summly was created by 17-year-old Nick D'Aloisio and launched for Apple’s (AAPL - Analyst Report) iPhone. The app works as a news condenser i.e. it narrows down a full-length article or news to 350-400 words thus making it easier for readers to grasp the gist of the news.
Following the acquisition, Nick D'Aloisio is set to join Yahoo as its youngest employee. The Summly app will close down and the technology will be integrated into Yahoo’s mobile platform.
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; Propeld, a location-based apps maker and Jybe, a social recommendation site.
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 continue 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).