Yahoo! Inc. (YHOO): It’s All About Traffic

Mobile world

Google and Facebook are solid in the mobile world of smartphones and tablets, while Yahoo! is relatively weak in mobile. The purchase of Tumblr, which is strong in mobile, particularly mobile advertising, can potentially turn beneficial for Yahoo!. Moreover, Yahoo! could utilize Tumblr to get its footprint into the prospering world of mobile advertising.

As of today, Facebook is the number-one seller of online-display advertising in the U.S., a title once owned by Yahoo!. Given Yahoo!’s mobile-ad revenue is only $125 million annually, which is far behind peers such as Google and Facebook, the company realized it must intensify its focus on mobile.

In addition, Yahoo! Inc. (NASDAQ:YHOO) finally realized that if you can’t beat them, you might as well join them. Yahoo! reached an agreement to team up with Google on contextual advertising.

Tumblr users can follow other user updates in the same manner Facebook users follow friends and share personal information. These types of features allow Tumblr to effectively merge blogging with social media. Basically, Yahoo! is mirroring the same methodology successfully implemented by Facebook and Google.

The Foolish bottom line

I certainly believe despite the top dollar Yahoo! Inc. (NASDAQ:YHOO) paid for Tumblr, it will prove beneficial in the long run. The traffic Tumblr will generate on Yahoo!’s site might turn the heavy investment to Marissa Mayer’s most important strategic decision.

Moreover, for Yahoo! to better compete with Facebook and Google it must use its positive cash position and place the chips on potential growth engines such as Tumblr. Finally, Marissa Mayer might do to Yahoo! what Steve Jobs did to Apple and lead Yahoo! back into the front stage.

The article It’s All About Traffic originally appeared on Fool.com and is written by Yaniv Hirsch.

Yaniv Hirsch has no position in any stocks mentioned. The Motley Fool recommends Facebook and Google. The Motley Fool owns shares of Facebook and Google. Yaniv is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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