Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Two Companies Yahoo! Inc. (YHOO) Should Buy Instead of Tumblr

Page 1 of 2

After snatching up Tumblr and now on the prowl for Hulu, Yahoo! Inc. (NASDAQ:YHOO) should instead buy some established growth companies. At the end of last year, Yahoo suddenly became cash rich after cashing out of a large investment in Alibaba. The company is now using the cash to buy well-known growing brands, but will it work?

Yahoo icon

Yahoo is following in the footsteps of the Facebook Inc (NASDAQ:FB) purchase of Instagram for $1.0 billion in the hopes of monetizing a vast and growing user base. The company paid roughly $1.1 billion for hot blogging network Tumblr that only has a revenue base of around $13 million. The question remains whether Yahoo! Inc. (NASDAQ:YHOO) would be better off making a large purchase of an under monetized asset or go for some of the public firms already on successful monetization paths?

Is Hulu the best option?

According to AllThingsD, Yahoo is bidding in the range of $600 million to $800 million for Hulu. At the top end of the range, Yahoo! Inc. (NASDAQ:YHOO) will have spent nearly $2 billion on the two purchases. This move comes after failing to obtain a stake in French video site Dailymotion and comes amid numerous other bidders for the site making a deal hardly assured.

What does Yahoo! Inc. (NASDAQ:YHOOget in the deal? According to this article, Hulu has a revenue base of $695 million for its video streaming service. The site has 10 million people visiting its website with over 3 million paying subscribers. While the subscriber base isn’t impressive, the revenue total is much more attractive than Tumblr.

Leading independent mobile ad network

A more intriguing purchase would be the leading independent mobile ad network, Millennial Media, Inc. (NYSE:MM) that currently has a market cap of only $655 million. The company works with most of the Ad Age leading advertisers and would provide Yahoo with an immediate large presence in the mobile ad space.

Analysts forecast the company to generate $275 million in revenue this year growing at a 55% clip. Millennial Media is also expected to be slightly profitable this year providing Yahoo! Inc. (NASDAQ:YHOO) a base to build upon with its massive sales force as opposed to needing to derive a monetization plan.

With the stock down massively since the IPO back a year ago, investors are unlikely to jump at any mild premium so price could become a major sticking point. The company though provides access to data from 420 million monthly unique mobile visitors globally.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!