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Yahoo! Inc. Winks as It Buys Blink App

Pushpa Naresh

Pushpa Naresh

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Yahoo! Inc. (YHOO) has made the first big move in recent years: It has bought out Blink app, for an undisclosed amount.

What’s Blink?

Blink is one of the many, all new and exciting messaging apps (which differs from trendsetters like WhatsApp and similar messaging apps) following the SnapChat philosophy: It self-destructs within a user-controlled timespan!

SnapChat has been a newsmaker in recent months, not as much for its hit "disappearing snaps"-based feature, as for the unsuccessful acquisition bid by social media giant Facebook Inc. (FB) for a whopping $3 billion. Where Snapchat allows users to upload photos or snaps which disappear to self-destruct within a few seconds after they viewed/displayed, Blink works on much the same principle for messages, images, videos and more!

Yahoo Inc.’s First Big Acquisition Post-Alibaba IPO Announcement

Much of Yahoo Inc.’s fortunes in the past few quarters are being driven not by internal growth factors but by much of the external "performers" in which it holds critical stake. Alibaba, the Chinese ecommerce giant which is privately held by founders such as Jack Ma and executives along with SoftBank, is the star of Yahoo Inc.’s growth, in which it currently holds a 22.6% stake.

But Stake in Alibaba Is 22.6%, Not 24%

Incidentally, industry analysts had assumed Yahoo Inc.’s stake in Alibaba was much higher at 24% but as per filings before the U.S. Securities and Exchange Commission as part of its Initial Public Offering, Alibaba revealed the actual stake held by the once popular search engine giant!

Ever since Alibaba’s IPO offer has surfaced, analysts have been researching and crunching numbers to note the gains which Yahoo Inc. will hope to see, ever since the downward trend beginning 2006.

Troubled in mid-2006

Yahoo! Inc. (YHOO) despite being the trend setter and technology services innovator for the Internet at the turn of the millennium, ran into troubled financial waters as the company’s founding members lost their way in taking it forward, unlike competitor and open source platform giant Google Inc (GOOGL). As Google soon diminished Yahoo's relevance as it unleashed services which Yahoo could not match, it was further sidelined as Microsoft Corporation (MSFT)’s Bing made inroads into Yahoo’s traditional U.S. business community user base along with Yelp Inc. (YELP).

By 2006, Yahoo had well hit the worst phase, eventually making changes at the top-most level to bring in dramatic change. As Marissa Mayer, with dog-years of experience driving Google’s Search Engine products, moved to take over as Yahoo’s chief executive officer, there has been a focused strategy towards making Yahoo the service for the mobile platform!

There have been revenue-sharing forays with Bing and Yelp, but Alibaba continues to be the highest revenue garnerer currently.

And Alibaba’s IPO offer will bring in more funds.

Past the IPO, Yahoo will have to sell nearly 40% of the stake it owns, which is expected to bring in substantial funds which will drive growth by way of acquisitions.

The first big move to acquire the Blink App is therefore understandable.

“First with the big deal” says Robert Cox during discussions with Ed Lazear and Hoover for the Reuters program Breaking views, is the “likely motivation behind Yahoo's acquisition of mobile messaging app "Blink". The reason you pay up for these things is because they have a user base.

Increase in number of users and higher engagement is what Yahoo currently desires and Blink could well be the "wink" which will accelerate Yahoo back into the echelons of technology profit making companies with higher user engagement, advertising revenues and substantial quality improvement in the content it provides as it now cuts deals with Spotify to Clear Channel and CNBC.

About the author:

Pushpa Naresh
I have done my MBA (Finance) and an avid market tracker.

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