Yahoo! Inc. (YHOO)’s Acquisition Of Tumblr Is A Calculated Risk

Google, on the other hand, has developed its Google+ platform, which now is well integrated with Google sites such as Gmail, Reader, YouTube, Drive, and Play, among others. Google also acquired YouTube, a remarkable video and picture-sharing portal, which receives more than 1 billion monthly visits. Google is the market leader in the search business, and the social platform only comes as a complement to its core business.

The search engine giant commands about 67% of the search business overall, with minimum threat coming from Microsoft’s Bing and Yahoo search. Facebook has also ventured into search, and aims to offer something different from what the others have been providing to users by incorporating social profiles in ranking search results.

This is exactly what Yahoo! Inc. (NASDAQ:YHOO) must seek to do with the acquisition of Tumblr. Yahoo can use Tumblr’s content to optimize its sites and enhance user search experience. This is yet another benefit to add on top of the many mentioned earlier.

The Bottom Line

Yahoo is simply making the first realistic step in it’s bid to compete with Google in the search business. Google was clever to notice the threat of Facebook, and quickly moved to introduce a social platform in its line of products. Advertisers are also beginning to realize that, despite it’s raw state, social networking is growing stronger in terms of sales conversion. The engagement levels exhibited by Facebook have, without a doubt, caught the eye of merchants as well as rivals like Google and, now, Yahoo. Indeed, even Marissa Mayer stressed engagement as a major target for the company early this year. Yahoo has spent a lot of money on an investment that is subject to the test of monetization. But, the company seems to be well aware of the risk, and I believe that the expected benefits are continuous and play a big role in the company’s future in the search business. The acquisition of Tumblr is a well-calculated risk, so watch Yahoo on the rise.

Nicholas Kitonyi has no position in any stocks mentioned. The Motley Fool recommends Facebook and Google. The Motley Fool owns shares of Facebook and Google. Nicholas is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Yahoo’s Acquisition Of Tumblr Is A Calculated Risk originally appeared on Fool.com and is written by Nicholas Kitonyi.

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