Yahoo’s Social Media Inadequacy: Is MeetMe the Answer?

Source: Thinkstock

Source: Thinkstock

Did you know that Yahoo (NASDAQ:YHOO) has over 430 million monthly mobile users accessing its products? That is pretty impressive. The company, led by the brash CEO Marissa Mayer, has been trying to turn around after a decade of struggles. Things are slowly starting to come together, but there is one area in which the company, in my opinion, desperately needs growth. That area is social media.

Look, Google (NASDAQ:GOOG) (NASDAQ:GOOGL) has its Google Plus, and obviously Facebook (NASDAQ:FB) is a social media giant as is Linkedin (NYSE:LKND). There is, however, one newer, younger, and rapidly growing company that I believe is a takeover target for any of these companies, but I believe it may best fit Yahoo. That company is MeetMe (NASDAQ:MEET). MeetMe started off very slowly, but is rapidly moving up the ranks with its new focus on mobile. It has more mobile users than web users, and generates more revenue from them as well. With Yahoo’s access to 430 million mobile users but no real social media presence (at least, none that are overwhelmingly popular), this is a takeover that makes sense.

Although Yahoo is performing, it desperately needs to diversify out into the social space. But can the company afford to do this? Absolutely. In fact, the company is trying to make all the right moves lately, and this one would a strong decision and good value for the price.

Yahoo has really turned things around, and now that it has cash, it’s looking to acquire undervalued and promising companies. In its last quarter alone, GAAP revenue was $1.133 billion. Revenue excluding traffic acquisition costs was $1.087 billion for the quarter a 1 percent increase compared to the first-quarter of 2013. However, earnings are hurting. Adjusted EBITDA was $306 million, a 21 percent decrease compared to the first-quarter of 2013. GAAP income from operations was $30 million, an 84 percent decreasefrom the first-quarter of 2013. Non-GAAP income from operations was $149 million for the first-quarter of 2014 compared to $224 million in the first quarter of 2013. GAAP net earnings was $312 million, a 20 percent decrease compared to $390 million in the first-quarter of 2013. GAAP net earnings per diluted share was $0.29 compared to $0.35 in the first-quarter of 2013. Non-GAAP net earnings per diluted share was $0.38 for the first quarter of both 2014 and 2013.

Now Yahoo has continued to launch new products and improve existing properties here in 2014, innovating for the daily habits of users around the world. The company launched two digital magazines: Yahoo Food and Yahoo Tech; a new version of Yahoo Sports optimized for iOS 7; Yahoo News Digest for iPhone and iPod touch; Yahoo Smart TV; Aviate Listening Space; Yahoo Games Network and Yahoo Classic Games; and Yahoo Screen integration with Roku. Yahoo also announced a partnership with Yelp to showcase user reviews, business information, and star ratings. This is a touch into the social media space, but I maintain that someone will buy MeetMe and that company should be Yahoo. As a Yahoo shareholder, this makes sense.