Yahoo wants to invest some $20 million in the messaging app

Oct 4, 2014 12:46 GMT  ·  By

Yahoo has a whole lot of money from its sale of Alibaba shares last month and it’s looking into doing some more key investments. Rumor has it that Yahoo has set eyes on Snapchat, the famous startup that rejected $3 billion (€2.4 billion) from Facebook.

According to the Wall Street Journal, the Internet giant has committed to invest in Snapchat at a $10 billion (€8 billion) valuation. The sum Yahoo seems to be willing to invest is quite small compared to the takeover proposals Snapchat has received, namely some $20 million (€15.98 million).

The mobile messaging service has been looking for more money from venture capital firms and various companies, so Yahoo’s investment would fit right in.

By putting some money into Snapchat, it seems that Yahoo is making a sure bet, because the company is already so interesting to giants such as Facebook, but more specifically to users around the world. The growth of the app could indicate that at one point or another, the company will be big enough to list on the stock market, at which time Yahoo would win big.

While the investment in Snapchat could pay off in the end, it also comes with some risks, because the messaging tool has yet to figure out how to make its business really profitable. The over 100 million users it has, however, is enough of an incentive for Yahoo to make a move and try to get a stake in the company, even if it’s not a particularly hefty one.

$1 billion well invested in Alibaba

Back in 2005, Yahoo invested $1 billion (€0.8 billion) in Alibaba, a then-small ecommerce company. Of course, this has paid off in the end, even if Alibaba did buy back some of its shares from Yahoo a few years back. With the remaining stock, Yahoo has earned tens of billions of dollars, especially now that Alibaba has launched at the stock market in what has been the biggest IPO in history.

By selling a portion of its shares, Alibaba won more than $5 billion (€4 billion), so its pockets run deep. Marissa Mayer, the Yahoo CEO, has committed to return at least half of the sum to shareholders, which makes everyone wonder what she’ll do with the rest.

Well, if she continues on the same path as she’s been on so far, she’ll likely continue buying smaller companies left and right, which is what she’d done with most of the money obtained following the initial sale of Alibaba shares.