Yahoo Acquires Qwiki Inc.

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Internet giant Yahoo! Inc. (YHOO) recently announced the acquisition of mobile app developer Qwiki Inc. for $50 million (reported by AllThingsD). Financial details of the deal were not disclosed.

New York-based, Qwiki Inc. was founded by Doug Imbruce and Louis Monier in 2011. It launched an app for iPhone wherein users could create movies from photos and videos stored on their phones. It also entered into a partnership with ABC News to create interactive stories for the news platform. After the closure of the deal, Qwiki’s employees will join Yahoo's mobile engineering team at its California headquarters.

Qwiki’s app is quite similar to Facebook's (FB) Instagram, an app used for photo capture and sharing. Yahoo also picked up GhostBird, a photography app-maker. The acquisitions of both GhostBird and Qwiki make sense as Yahoo wants to offer apps with new features to attract more users to its website.

After CEO Marissa Meyer took over the reins of the company, it has been quite active on the acquisition front. Some of its recent acquisitions include Astrid, a task-management app maker; Summly, a news-condenser app maker; 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; Jybe, a social recommendation site; Loki Studios, a mobile gaming start-up, PlayerScale, a gaming infrastructure company, photo app maker GhostBird Software; enterprise conference call service provider, Rondee and mobile app developer Bignoggins Productions.

Yahoo’s attempts to strengthen its mobile offerings and upgrade pages have led to a 70% increase in mobile email usage and a 50% increase in Flickr photo uploads from mobile platforms.

We are positive about Yahoo as its search business continues to show signs of improvement, even in the face of tough competition from Facebook, Google (GOOG) and Microsoft (MSFT). Currently, Yahoo has a huge task at hand, which is to bring back its users and make them spend more time on its properties. If successful, Yahoo may reclaim some of its lost market share going forward. This would be crucial in bringing back advertisers as well.

In the first quarter of fiscal 2013, Yahoo generated revenues of $1.14 billion, which were down 15.3% sequentially and 6.6% year over year. Traffic acquisition cost (TAC) was down 42.3% sequentially and 49.9% year over year. Excluding these costs in all periods, net revenue was down 12.5% on a sequential basis and 0.8% from last year, short of the consensus estimate.

Yahoo has a Zacks Rank #1 (Strong Buy).

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