Would Snapchat Investment Help Yahoo's Ailing Bottom Line?

Yahoo could be part of a multi-company investment round valuing Snapchat at $10 billion.
Posted at 10:04 AM, Oct 04, 2014

Yahoo is said to be investing again — this time in ephemeral messaging service Snapchat.

Yahoo would commit $20 million, according to The Wall Street Journal’s sources, as part of a multi-company investment round that would value the messaging service at $10 billion.

The deal could give Yahoo access to an important younger age demographic, writes The New York Times, and help it make inroads in mobile tech — "an area in which Yahoo has long been seen as a laggard compared with competitors like Facebook and Google."

And for a fairly modest investment, too. Yahoo generated more than $9 billion in cash from the sale of its stake in Chinese e-commerce giant Alibaba.

TechnoBuffalo says, "It makes sense to funnel that cash into another growing tech firm, and for now it sure seems like Snapchat has nowhere to go but up."

But before — and especially after — Yahoo got a shot of cash from Alibaba's market debut, investors have been criticizing the company for a core business that's still losing steam, and for hefty acquisitions intended to spur growth that haven't panned out.

"The stock's traded off since the Alibaba IPO because I think there's not a lot of confidence among most investors that Marissa Mayer and Ken Goldman, the CFO, are going to be able to unlock that value." (Video via CNBC)

Activist investment firm Starboard Value in particular has called out Yahoo for its Tumblr acquisition. According to Fortune, the firm contends the investment has "failed to deliver."

It's worth noting Snapchat has yet to figure out how to generate revenue of its own. Yahoo might invest $20 million, but Snapchat wouldn't be contributing much to Yahoo's bottom line in return.

Sources told The New York Times although talks accelerated late this summer, Yahoo has yet to close the funding deal.

This video includes images from Getty Images.