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Yahoo!'s Alibaba Cash Could Trigger a Buying Binge in Tech

Stocks in this article: YHOO YELP FB GOOG RUBI MM

User-Generated Content

As Yahoo! seeks to boost not only revenue, but user engagement and eyeballs as well, user generated content companies have never been hotter. Yahoo! purchased Tumblr, a user-generated-centric platform in May 2013 for $1.1 billion in cash and stock, despite the fact the company only did $12 million in revenue in 2012.

At a recent JPMorgan investor conference, Yahoo! CFO Ken Goldman noted what the company needs to do is continue building out its presence on mobile. "I think the thing we need to do is those eyeballs have been going mobile and clearly that's where we show the growth and so where in mobile whether its video, social and Tumblr," Goldman said at the June conference.

Mayer has tried to buy Yelp in the past, when she was a high-ranking executive at Google, and may look to do so again, now that she's at Yahoo!. "Potential acquirers of Yelp could include: Amazon, Ebay, Google, Microsoft, and Yahoo (plus some international players)," wrote SunTrust analyst Robert Peck in a research note, when discussing the OpenTable (OPEN), Priceline (PCLN) transaction.

Yahoo! recently announced it would be incorporating Yelp's reviews, business information and star ratings to Yahoo! Search, but the company's business model feeds on itself, providing an economic moat.

Yelp spokeswoman Katrina Hafford had no comment for this story.

In a recent interview with TheStreet, Zillow (Z) Chairman Rich Barton argued user-generated content companies are very hard to replicate.  "The UGC that Yelp has and that TripAdvisor (TRIP) has, those are just dreamy," Barton said in a June 11 interview. "The more content you have, it attracts the more users to it. The more users, the more content. Now you have more content, it attracts more content."

For the first-quarter, Yelp lost 4 cents a share on $76.4 million in revenue, as cumulative reviews grew 46% year over year to approximately 57 million. Yelp noted that active local businesses continue to take to the platform, as there are now approximately 74,000 local business accounts on the service, up 65% year over year.

Even though Yelp is expected to generate approximately $365 million in revenue this year, according to analyst surveyed by Thomson Reuters, the company's market cap is over $5 billion, making it a major acquisition, and potentially Mayer's largest acquisition to date.

Other smaller companies in the user-generated content space that have been mentioned as potential Yahoo! acquisition targets include WordPress, a Tumblr-competitor, and the recipe recommendation and search engine app, Yummly, which sees more than 15 million monthly unique visitors, and generates more than 25 page views per visit on mobile.

Yummly CEO and co-founder Dave Feller would not comment on specific talks. "We are continually evaluating opportunities to leverage our strength in food data, search and discovery to deliver personalized content and commerce experiences for consumers," Feller said in an emailed statement. "While we know that Yummly is an attractive strategic target for some companies, we don't comment on specific dialogues."

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