Wednesday, October 15, 2014

Yahoo gets serious about mobile messaging apps

AUSTRALIA: Internet giant Yahoo is deepening its focus on the mobile messaging market, reportedly acting as lead investor in an upcoming funding round for Snapchat, which will value the self-destructing messaging app provider at about $10 billion.

Earlier this year, Yahoo acquired Blink, a self-destructing messaging app start-up that offers a similar service to Snapchat, and earlier this month it acquired yet another mobile messaging app, MessageMe. Yahoo is potentially setting itself up to either significantly revamp its own Yahoo Messenger app for mobile, or launch a completely new messaging app.

Pamela Clark-Dickson, senior analyst, Consumer Services, Ovum, spoke on Snapchat, MessageMe, and Blink investments that signal Yahoo’s commitment to messaging.

Under Marissa Mayer, Yahoo’s focus has increasingly become mobile. In May 2014, Yahoo had 430 million mobile users, an increase of 43 percent year-on-year, and the company expects its mobile traffic to outstrip its desktop traffic by the end of 2014. Yahoo has increased the number of employees working on mobile from 60 to over 500 within two years.

With the reported lead in the upcoming Snapchat funding round, and its acqui-hires of MessageMe and Blink, Yahoo seems focused on either making significant improvements to Yahoo Messenger, or launching a completely new mobile messaging app that would sit alongside Yahoo Messenger.

Investing in Snapchat could be viewed as a coup for Mayer, in that Yahoo has seemingly succeeded in getting a stake in the company, following Snapchat’s refusal of offers from Facebook and Google. Clearly, the Snapchat management prefers investment at this stage, or at least until it is satisfied with the amount of money offered.

Snapchat reportedly has 100 million monthly active users, which between them send 700 million Snaps a day (August 2014) and over 1 billion Snapchat Stories a day (June 2014). That level of user engagement strongly positions Snapchat to determine its own path, at least for now.

A tie-up with Yahoo would help Snapchat to populate and monetize its forthcoming Snapchat Discovery, an advertising-based ephemeral content delivery service. Yahoo has a wealth of content and a substantial advertiser base which Snapchat could tap.

Investing in a company that does not yet generate revenue might seem a risky strategy for Yahoo, but should Snapchat Discovery launch in November, as planned, Snapchat stands a good chance of providing a compelling new service from which it can earn advertising revenue, a proportion of which would be passed on to Yahoo. But Yahoo would also benefit from being able to expand its presence in mobile by harnessing Snapchat’s user engagement and innovation.

In addition, Yahoo will be able to use the skills of the Blink and MessageMe teams to either continue to enhance the mobile Yahoo Messenger app, to which it recently added beta voice and video calling features, or develop a new mobile messaging app. Ovum believes the company’s renewed focus on mobile messaging is not before time, with Yahoo typically viewed as significantly lagging both its traditional and new competitors.

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