Right now, Google’s advertising network is at the top of its game, due largely to the popularity of Google Inc (NASDAQ:GOOG)’s search engine and its YouTube streaming video service. While Google Inc (NASDAQ:GOOG) could eventually tumble and might even be in the same position as Yahoo! one day, it’s not likely to happen anytime soon. YouTube isn’t going to simply stop being the go-to destination for streaming video on a whim, and while Microsoft Corporation (NASDAQ:MSFT)’s Bing search engine is aggressively trying to take out some of Google’s market share I don’t think that anyone is holding their breath in regard to Google search falling from the top spot. Yahoo! Inc. (NASDAQ:YHOO) can’t compete by following its traditional business, so if it wants to regain its relevance then it has no choice but to change the game.
Tumblr, PlayerScale, and Hulu (if Yahoo! gets it) will all open up new advertising opportunities for the company and additional revenue inroads as well from premium services and PlayerScale’s software-as-a-service licensing model. Yahoo! is spending a lot of money right now, but at the very least the company is being smart by stepping outside of its comfort zone when looking for new acquisitions.
Into the brave new world
It’s a bit early to tell whether Yahoo!’s acquisition strategy will be just what the company needs or a nail in the company’s coffin. The company had approximately $1.2 billion to spend before the Tumblr deal, but the platform’s $1.1 billion cash price tag left little of that available for other acquisitions. Given that one of Hulu’s founders are rumored to have offered at least $500 million for the company, Yahoo! might be hard pressed to continue its expansion in the direction that the company wants to go.
Even if Yahoo! does manage to get Hulu, it will then be tasked with overcoming competition from Netflix, Inc. (NASDAQ:NFLX) which has recently introduced new strategies of its own. Netflix, Inc. (NASDAQ:NFLX) is creating original programming that thus far has received largely positive reviews, and it has also inked high-profile deals with companies such as The Walt Disney Company (NYSE:DIS) and DreamWorks to bolster its content lineup in the coming years. With an increasing number of streaming options all vying for a chance to go head-to-head with Netflix, Yahoo!’s Hulu would have to overcome its current crisis of direction in pretty short order if it hoped to have a shot.
On the plus side, Hulu does have access to content that Netflix, Inc. (NASDAQ:NFLX) doesn’t (though this may be at least in part due to the partial ownership of the service by NBC Universal). If Yahoo! Inc. (NASDAQ:YHOO) does acquire Hulu, it could potentially leverage this content to its advantage and give the service a clear direction moving forward. It would be a strong asset for the company, and along with Tumblr and PlayScale could even be the beginning of a strong new Yahoo! that’s willing to face its competition head on.
The article Is Yahoo! in Acquisition Mode? originally appeared on Fool.com and is written by John Casteele.
John Casteele has no position in any stocks mentioned. The Motley Fool recommends Google and Netflix. The Motley Fool owns shares of Google and Netflix. John 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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