Facebook to Grow in Online Publishing with Tugboat Yard - Analyst Blog

Zacks Equity Research

Updated Thu, May 21, 2015, 2:25 PM

Facebook FB recently acquired the startup Tugboat Yards in a bid to foray into the online publishing business. Per the deal, Tugboat Yards will close its business on Jun 30, and the entire team will join Facebook’s network’s product team. According to a Facebook representative, however, this is "more of acqui-hire" than a formal acquisition.

Founded in 2012, San Francisco-based Tugboat is an online media company which offers tools for small and medium-sized web publishers to accept payments from readers. Apart from this, the company owned LiveJournal and developed the TypePad blog hosting service.

We believe that Facebook’s latest acqui-hire will enable it to grow in the publishing business and given the growing online payment market, Tugboat will be accretive to Facebook’s top line, going forward.

We believe that integrating Tugboat’s technology into Facebook's growing news platform would make the social networking giant popular among content developers looking for popular hosting platforms with hassle-free payment services. This also enables the online publishing company to offer comprehensive solutions to businesses engaged in media service.

Apart from Tugboat, the company has reportedly struck deals with content publishers like NBC News and The New York Times to post their articles directly on its Apple AAPL iOS app to enable users to read these articles right inside their Facebook app. Also, this will help publishers to get faster access to users with easy upload/download systems. For now, Facebook is also offering them all of the related ad revenues (or 70% if Facebook sells the ads).

For Facebook, which competes with micro-blogging site Twitter TWTR, this acquisition will open up additional revenue opportunity in the online publishing department. Facebook currently has a Zacks Rank #3 (Hold). A better-ranked stock in this sector is Attunity Ltd. ATTU sporting a Zacks Rank #1 (Strong Buy).

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