In addition to writing this blog for fun and profit, I am also a professional financial freelance writer, as well as a freelance technology writer, among other things. So it is not without some professional writing background that I read with shock the financial news that Yahoo is acquiring Associated Content for “slightly more than $100 million.” Ostensibly, Yahoo buying Associated Content was done in order to boost Yahoo’s content offerings. If that is true, then it time to sell Yahoo! stock. Sell, baby, sell.
Before we go any further, let me just say that I think the publicly released one-liner about why Yahoo would buy Associated Content is either incomplete, or an outright bluff. There are plenty of other things Yahoo gets from buying Associated Content, not the least of which is a big fat swath of Internet real estate that ranks obscenely high in Google search results and Bing search results. A great deal of the traffic generated from these high ranking searches is monetized via, you guessed it, Google AdSense which pays content publishers based upon ads placed by Google on those websites. Yahoo, can now switch out those Google Ads and replace them with their own Yahoo Ads. Frankly, this strikes me as a pretty cynical move, and one made largely to dupe the investing public at large that is not savvy enough to sort out the results of Yahoo’s acquisition of Associated Content.
Value of Yahoo’s Associated Content Purchase
In my mind, here is how the buyout of Associated Content by Yahoo plays out. First, as always, there is the generous write down of “goodwill” and other acquisition related costs. All but the most unsavvy of investors are wise to the so-called value taken by acquiring companies when it comes to these intangible assets, but it still makes things look better for a while to those who can’t or won’t parse company stock filings and investor reports.
Secondly, once Yahoo has milked the costs of acquisition dry, it will move advertising on Associated Content to its own Yahoo advertising platform or to its partner ad platform with Microsoft’s Bing search engine. In the meantime, the company may be all too happy to simply collect revenue from online competitor Google based on existing AdSense advertising that already exists on the site. Of course, Yahoo management will not break out the “growth” in Yahoo advertising that is nothing more than swapping out Associated Content ads for its own from the true organic growth of its Yahoo Ad platform. (Management is under no obligation to do so, of course.) So, analysts will be left guessing how much real growth is occurring in Yahoo ad revenue and how much was simply bought via its Associated Content acquisition.
Here is a hing for savvy investors, however. The revenue Associated Content generates today has no reason to decline in the coming months. There is no radical shift in online advertising going on, nor is Google seriously updating its search ranking algorithm that provides fresh meat for the Associated Content content mill on a daily basis thanks to the large interlinking done by the site itself. Thus, once Yahoo advertisements start appearing in place of Google advertisements, investors should discount the current volume of revenue generated by Associated Content from the revenue numbers reported by Yahoo for its advertising platform as the purchased revenue. Any remaining growth can be considered real Yahoo earnings growth.
I do not own any Yahoo! stock as of this writing, but that may change at any time. This is neither a recommendation nor an offer to buy or sell securities.
I have written for Associated Content in the past; some articles I have been paid for. However, no payment was made or offered for this article.