Why Yahoo just bought the next Snapchat

Yahoo acquired the self-destructing messaging service Blink for an undisclosed amount. The purchase is more about Blink's people than it is about the product.

By TheStreet.com Staff May 14, 2014 11:21AM

Yahoo logo on a smartphone © KAREN BLEIER/AFP/Getty ImagesBy Chris Ciaccia, TheStreet

Yahoo (YHOO) has yet to receive the utimate windfall from its 22.6 percent stake in Alibaba, but CEO Marissa Mayer is spending money again, this time on Blink, a clone of Snapchat. The Street on MSN Money

In a post to its Web site, Blink noted that as of Tuesday it would would be joining Yahoo, and that over the next few weeks, Blink, which is available on both Apple's (AAPL) iOS and Google's (GOOG) Android, would be shutting down.

"We built Blink because we believe everyone should be free to show the same honesty and spontaneity in their online conversations as they can in person," Blink said in the post. "We look forward to the possibilities that will come from bringing the Blink vision to Yahoo."

Blink is a Snapchat-clone, in that it allows users to send "self-destructing text messages, audio, sketches, video, & photos." Privacy is the chief concern of the messaging app.

With this acquisition, Mayer, true to form, is seen making an acqui-hire (a purchase for people, not products), and won't be keeping the product up and running.

According to a Yahoo spokesperson, "The entire team behind Blink and Kismet will be joining our mobile team in Sunnyvale where they will focus on smart communication products."

Financial terms of the deal weren't disclosed.

On Yahoo's first-quarter earnings call, Mayer laid out what some of the recent acqui-hires have given to Yahoo products, as she makes hiring engineers, specifically mobile engineers, a top priority.

"The Alike and Summly teams for example build News Digest," Mayer said on the call. "The teams from Rockmelt, Snip.it and Tumblr came together to develop the digital magazines platform. The Xobni team utilized their technology and our user's data to bring smarter contacts to Yahoo Mail. The teams from Distill and Bread played a key role in building our new comprehensive advertiser offering, Yahoo Ad Manager Plus and OnTheAir developed the popular Loops feature on the Sports App. And finally PlayerScale worked to launch the Yahoo Games network."

It's likely that Yahoo Messenger, perhaps Yahoo's least-talked-about mobile app, will integrate some of the features from Blink, including self-destructing texts and videos, given how popular Snapchat has become. According to recent statistics, Snapchat has more than 60 million users, with half of them active, who are sending more than 200 million snaps a day.

The company earlier this month added a new feature that allows users to hold conversations inside the app, conversing with friends like they do on instant messages, except the IMs disappear once the app is closed.

Given the fact that Snapchat recently turned down $3 billion from Facebook (FB) (which led to Facebook buying WhatsApp for $19 billion in cash and stock) and $4 billion from Google, it's clear why Mayer sees value in self-destructing messaging -- it's all about privacy and allowing people to feel safe on the Web.

Though Snapchat doesn't have much in the way of revenue, the potential is real and that's why an acquisition of Blink can only help Yahoo For the first quarter, Sunnyvale, Calif.-based Yahoo! earned 38 cents a share on $1.087 billion in revenue, excluding traffic acquisition costs (TAC).

Display revenue ex-TAC was $409 million, a 2 percent increase year over year, as the number of ads increased 7 percent from last year. But the price per ad continued to trend lower, falling 5 percent over the same time frame. Search revenue rose 9 percent year over year to $444 million excluding TAC.

Yahoo now has more than 430 million mobile users, and anything Mayer can do to increase the value of Yahoo's core services (messaging, email, sports, finance) to those mobile users, she'll do, one self-destructing text at a time.

More from TheStreet

May 14, 2014 1:17PM
Because... it has too much money and no commonsense? We need family-sustaining careers in REAL fields, not virtual stupidity. 
May 14, 2014 12:38PM
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