Associated Content Deal Could Lift Yahoo by 4%
Yahoo (NASDAQ:YHOO), which competes with Google (NASDAQ:GOOG), Microsoft (NASDAQ:MSFT), AOL (NYSE:AOL), the New York Times (NYSE:NYT) and others in the display advertising market, recently acquired Associated Content for around $100 million.
Associated Content has about 380,000 freelance writers that produce independent material on many subjects, ranging from hobbies to health and retirement planning.
We believe that the Associated Content will help Yahoo broaden its content offerings, which should allow Yahoo to add unique visitors to its site and also increasing the number of page views per user. If this scenario pans out, it could produce a 4% upside to our $21 estimate for Yahoo’s stock. Our analysis follows below.
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Leveraging Associated Content
Yahoo can collect common search queries asked by users on its search engine. Associated Content’s freelance writers can write articles based on these queries. Yahoo will thus be able to provide content based on what users want to read.
Associated content could help Yahoo acquire additional users
Yahoo had about 560 million unique monthly visitors in 2009. We expect monthly uniques to increase to around 680 million by the end of the Trefis forecast period.
By comparison, Associated Content had about 17 million unique visitors in March 2010 according to Comscore. We believe that Yahoo can use the Associated Content model to attract an additional 100 million unique visitors by 2016, yielding an upside of 3% to our $21 estimate for Yahoo’s stock.
Yahoo’s page views per user also benefits
Yahoo reported about 250 page views per user as of 2009. We expect this figure to reach 280 by the end of the Trefis forecast period.
Associated Content had about 80 million monthly page views on its site as of March 2010, or around 5 page views per user.
If Yahoo can enrich its content by catering to user needs, the number of page views per user should increase. Assuming that Associated Content helps Yahoo increase page views per user by 20 by 2016, we forecast an additional 1% upside to our $21 estimate for Yahoo’s stock.
You can see the complete $21 Trefis Price estimate for Yahoo’s stock here.