Yahoo Acquires Rockmelt

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Internet giant Yahoo! Inc. (YHOO) recently announced the acquisition of social media web browser startup, Rockmelt. Financial details of the deal were not disclosed.

California-based Rockmelt was founded in 2010. Its web browser incorporates social media features such as Facebook chat, Twitter notifications and widgetised areas for other content providers such as YouTube and local newspapers, enabling users to send Facebook messages and browse Twitter postings.

After CEO Marissa Meyer took over the reins of the company, Yahoo! has been quite active on the acquisition front. The Rockmelt acquisition marks Yahoo’s 20th acquisition under Marissa Mayer. Yahoo plans to shut down the existing Rockmelt product by the end of Aug 2013 and integrate the latter’s technology into its own media platform according to Reuters.

Some of Yahoo’s recent acquisitions include Lexity, an Ecommerce Service for Small Businesses; Ztelic, a social data analysis startup; 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; mobile app developers, Bignoggins Production and Qwiki Inc.; an email and address book management company, Xobni and mobile advertising startup, Admovate.

The acquisitions are part of a strategy to broaden and strengthen Yahoo!’s expertise in the mobile segment as adoption of mobile devices such as smartphones and tablets continues to accelerate. Through these acquisitions, Yahoo wants to offer apps with new features to attract more users to its website.

Also, with these acquisitions, Yahoo is picking up a whole lot of engineering talent as well as key technologies and products at a cheaper rate. These acquisitions can help Yahoo! enter the social marketing segment, where its rivals have already established themselves.

We are positive about Yahoo as its business continues to show signs of improvement, even in the face of tough competition from Facebook (FB), 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. This would be crucial in bringing back advertisers as well.

In the second quarter of 2013, Yahoo generated revenues of $1.14 billion, down 0.4% sequentially and 6.8% year over year. Traffic acquisition cost (TAC) was down 10.8% sequentially and 53.1% from last year. Excluding these costs in all periods, net revenue was essentially flat (up 0.3% sequentially but down 0.9% year over year), short of the consensus estimate.

Yahoo shares currently have a Zacks Rank #2 (Buy).

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