Yahoo Makes Play for Video Service Hulu

by Matt Klassen on May 28, 2013

The surprise generated from Yahoo’s $1.1 billion takeover bid for micro-blogging site Tumblr last week came mostly from questions of how the struggling company known primarily for its search and mail services would monetize a site that offered free services primarily to the young (i.e. those who don’t like to pay), as the last thing Yahoo needs as it tries to play catch-up with company’s like Google is a freeloader like Tumblr. While the acquisition admittedly gives Yahoo some options for embedded advertising, generating those revenue streams take times, patience, and skill…just ask Facebook.

So perhaps there’s some logic behind the news that less than a week after agreeing to purchase Tumblr, Yahoo is at it again, this time bidding on hotly contested streaming video service Hulu. The difference here of course is that unlike Tumblr, Hulu is a potentially revenue generating machine, and with its 4 million subscribers paying $7.99/month, its wide offering of original programming and full TV episodes, Hulu could give Yahoo the cash injection it so desperately needs.

But unlike Tumblr it looks like several other sharks are circling Hulu as well, meaning Yahoo may have to pay a premium for the premium video service.

While Yahoo remains mum about the details of its Hulu bid, Kara Swisher of All Things D has reported the search giant is offering between $600 to $800 million for the video site, competing against the likes of TV operators DirecTV and Time Warner Cable. The reason for the large range of purchase offerings, Swisher notes, is that it incorporates a variety of purchase scenarios, depending on licensing agreements and other considerations that may or may not be included in the deal.

The bid comes even as sources inside Yahoo admit that the company is contemplating two other large purchases as well—reportedly in the $150 million to $200 million range — both for companies that would get Yahoo into the mobile and telecommunications game.

While it remains to be seen how successful Yahoo will be with this myriad of purchase offers, if nothing else this buying blitz has put the Internet, mobile, and tech markets on notice that under the leadership of CEO Marissa Mayers, Yahoo is making a comeback…or at least giving it the old college try.

By acquiring Tumblr, bidding on Hulu, and possibly purchasing a mobile and a communications company, Mayers has clearly employed the strategy of her greatest rival, Google, in expanding Yahoo’s services to include everything people like to do on the Internet. Don’t be surprised if in the next few months Yahoo announces the acquisition of a burgeoning social network, completing the hand of cards it needs to compete at this high stakes Internet game.

In the end, while Hulu would offer Yahoo both the revenue and the streaming video service it so desperately needs, it’s a long way from being a done deal, particularly given that Swisher has also reported that sources close to the deal have admitted that its unlikely Hulu will be sold for under $1 billion, so unless Yahoo ups its bid, perhaps there’s no story here at all.

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Written by: Matt Klassen. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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