October 12, 1998 2:30 PM PDT

Yahoo to buy Yoyodyne

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October 8, 1998
Web portal Yahoo today announced it has moved to acquire Internet-based interactive direct marketer Yoyodyne Entertainment for about $29.6 million in an all-stock deal.

Under the terms of the acquisition agreement, Yahoo will issue 280,664 shares of Yahoo common stock for all outstanding Yoyodyne shares, options, and warrants.

Yahoo stock jumped 9.53 percent or 10 points to 115.68 in early trading today, still well below its 52-week high of 134.625. The stock has traded as low as 17.0625 during the past 52 weeks.

Yahoo's main intention in this acquisition is to use Yoyodyne's marketing power. Yoyodyne's technology will allow Yahoo to collect user data and essentially serve as a middle man between its users and its commerce partners.

Since Yoyodyne offers reward-based services, such as contest entries or online shopping access, Yahoo will use the service throughout the site as a way to attract users. If users consent to sign up, Yahoo can then obtain more detailed information about their online shopping and usage patterns to send more focused product offers to them.

"We can use the aggregate [marketing] data to understand how to optimize user performance across the network," said Yahoo chief operating officer Jeff Mallett.

The acquisition also allows Yahoo to sell beefed-up ad-banner packages to advertisers and merchants.

Despite Yoyodyne's emphasis on using email as its means of distributing product offers, antispammers such as Jason Catlett, who is president of Junkbusters, have applauded Yoyodyne's policies of gaining user consent before sending off a series of email offers.

Other antispammers agree that the move is positive for marketing services that seek consent before initiating the email barrage. "[Yoyodyne seems] to be very responsible in their methods of marketing, and pretty much dedicated to the opt-in model when it comes to email advertisements and solicitation," said Ray Everett-Church, cofounder of the Coalition Against Unsolicited Commercial Email. "Junk marketing in any form tends to turn consumers off."

Last week, Yahoo saw its stock fall more than 10 percent despite posting better-than-expected third-quarter profits. The company's strong earnings performance was expected to bode well for the Internet industry, which has seen its stocks hit particularly hard during the past few weeks as the markets tumbled. But instead, Yahoo also became a victim of the volatile markets.

The portal firm posted net income of $16.6 million, or 15 cents per share, compared to profits of $681,000, or 1 cent per share a year earlier.

The transaction will be accounted for as a pooling of interests. Yahoo expects to record a one-time charge of approximately $2 million in the fourth fiscal quarter of 1998 relating to expenses incurred in connection with the transaction. The acquisition, which is subject to certain conditions, is likely to be completed in the fourth quarter.

In addition to its custom direct marketing programs, Yoyodyne, which launched in 1995, features four programs: EZSpree.com, an aggregator of name brand online shopping sites; GetRichClick.com, a site that aims to transform traffic into targeted, unduplicated visitors to sponsoring sites; EZVenture.com, a promotion targeted at entrepreneurs and small businesses; and EZWheels.com, a site delivering qualified, motivated car buyers directly to car manufacturers.

The company's clients have included, among others, America Online, American Express, Microsoft, Netscape Communications, and Sprint.

 

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