Yahoo! is once again on a shopping spree and this time, it is looking into the possibility of investing in Snapchat. The company may be able to close the deal at around $20 million.
Yahoo! wanted to earn another successful investment after it reaped the rewards of investing in Alibaba. In 2005, Yahoo! reportedly paid $1 billion to earn a 40 percent stake in the Chinese-owned e-commerce company. After selling a portion of its stake, Yahoo! earned tens of billions of dollars.
It is highly unlikely that Yahoo! would be spending a huge amount of investment money into Snapchat, but the move would eventually give Yahoo! access to the popular messaging service and relevance among the younger age groups. Furthermore, Yahoo! would gain a more strategic position in mobile technology, which may enable the company to keep up with competitors, such as Google and Facebook.
Yahoo! said that half of the proceeds from the sale of the Alibaba holdings will be spent on buying back stock. Some portion of the money may be used in strategic investments and acquisitions.
Snapchat, a startup company that is based in Los Angeles, makes a mobile app that allows users to send self-destructing photo messages. Currently, there are over 100 million Snapchat users. In the latest funding round, the company earned a valuation of $10 billion and joins other companies worth the amount or more.
Yahoo! has been engaged in more than two dozen deals under the leadership of Marissa Mayer, who assumed office in July 2012. At the start of 2014, Yahoo! acquired the startup analytics provider Flurry under a deal that reached over $300 million. In 2013, Mayer spent around $1 billion after finalizing the acquisition of blogging service Tumblr.
"Snapchat is certainly attracting plenty of attention in Silicon Valley and is well thought of," said Paul Sweeney, U.S. director of research of Bloomberg Intelligence. "However, many Yahoo! investors prefer that the company return more, rather than less, of the Alibaba proceeds."
