Deal Breakdown: What To Know About Yahoo's M&A Strategy

Industry Chatter

Industry watchers have been buzzing about Yahoo lately.

There's chatter the company -- which has seen a raft of M&A deals under CEO Marissa Mayer -- is set to strike a deal to buy Snapchat, a messaging app that lets its users share photos, videos and messages that disappear after a set amount of time. The popular company has been reportedly wooed by the likes of Facebook and Google.

But there's been speculation about Yahoo's next moves after it cashed in with the sale of 140 million Alibaba shares, equating to $9.4 billion in proceeds, in September. That same month activist investor Starboard Value called for the company to halt what it called an "aggressive acquisition strategy" and consider a combination with AOL. Yahoo confirmed receipt of the letter and its intent to review it.

Get a better handle on the company's buying strategy to date by clicking through this slide show.

*Figures are based on research from CB Insights.

Financial Performance

Before getting into an analysis of the deals struck under Mayer, take a peek at where the company is at financially.

Yahoo reported second-quarter revenue down about 5 percent to $1.08 billion. Net income for the same period was $272.56 million, down 18.6 percent from a year earlier.

The company's stock is up about 2 percent so far this year to a recent market capitalization of $40.53 billion.

Buying Binge

Yahoo, under Mayer, has been on a buying spree.

Mayer was appointed CEO in July 2012. The company made 29 purchases in Mayer's first full year on the job and it's made 14 buys so far this year.

That's a total of 43, which surpasses the 22 deals Yahoo made between 2007 and 2012.

By The Numbers

Here's a breakdown of Yahoo's purchases categorized by industry, courtesy of CB Insights:

*For the period ranging from third-quarter 2012 to third-quarter 2014

Social: 4

Video: 3

Advertising, Sales and Marketing: 3

HR & Workforce Management: 2

Gaming: 2

Photo: 2

Content Management: 2

Social: 2

Search: 2

Photo: 2

By Geography

California-based companies made up the bulk of Yahoo's acquisitions at 77.5 percent of the company's deals, according to CB Insights.

New York placed a far second, accounting for 12.5 percent of Yahoo's deals under Mayer.

Washington accounted for 5 percent, while Oregon and Massachusetts tied at 2.5 percent each.

Tumblr Tops List

The largest of the deals closed under Mayer's watch was the $930 million buy of Tumblr in 2013.

The deal was seen as a move to not only add a fast-growing online, social community into Yahoo's fold but also nab a younger audience via Tumblr's more than 100 million users at the time of the deal.

It's hard to say whether Yahoo has benefited from the deal; the company does not break out the financial performance of Tumblr in its quarterly reports.

Recent Deals

Yahoo's most recent purchase was for mobile app analytics company Flurry in a deal that closed in August.

Yahoo didn't disclose the purchase price and reports are mixed on what the company paid, with estimates ranging from $200 million to $300 million.

That came on the heels of Yahoo's purchase of ad-based image platform Luminate in September for an undisclosed amount. Luminate was then promptly shuttered. The six-year-old company had raised a total of $29 million in funding prior to the deal and was seen as a potential boost to Yahoo's ad revenue stream.

The month before that was another buy in the ad space with ClarityRay, which makes software focused on ad fraud detection and security.

VC Winners

So what venture capital firms cashed out as a result of Yahoo's rapid-fire spending?

Google Ventures and Khosla Ventures.

Yahoo bought four companies Khosla Ventures invested in: social media Web browser RockMelt, mobile assistant app maker Incredible Labs, software applications maker Xobni and, maker of what's been pegged the Pinterest for news articles.

Google Ventures also invested in four companies later acquired by Yahoo.

Those included Luminate, task management app maker Astrid, blogging app maker Wander, and Stamped, a mobile app, and Mayer's first acquisition.

Companies Or Talent?

Yahoo shuttered 18 of the 29 companies it purchased in 2013, making it a prime example of a company with what's known in the industry as an "acqui-hire" strategy.

That is, the company purchased may not be so attractive from a financial standpoint but its talent sure is.