SUNNYVALE, California - Yahoo Inc. has purchased an uneconomic service of online advertising called 5to1 Holding Corp. for 28 million dollars in an effort to boost its revenue growth.
The agreement announced Wednesday that provides Yahoo with more tools to place advertisements for large companies looking to promote their brands online.
Approximately 20 Web sites in collaboration with 5to1 to sell their advertising space unused. These efforts were not successful for 5to1, which has been losing money since its creation in 2008.
Last year, 5to1 has lost about 9 million $ on an income of less than 1 million. The company, based in Santa Monica, had 19 employees, including five representatives of sales, in March, according to a filing with the Securities and Exchange Commission. Same filing indicated that 5to1 would need raise money to keep operating next year.
Yahoo earnings have increased recently, but its advertising revenues did not follow with the rest of the Internet. Last year, for example, income of Yahoo ad increased 1% only while sales total ad on the Internet rose 15 percent.
Financial funk has weighed on the price of the shares of Yahoo, leaving far below $33 a share the company could have understood had accepted it an offer to purchase of Microsoft Corp., three years ago. Shares of Yahoo fell 4 cents Wednesday to close at $15.96.
Investors have also been downgrading actions of the 5to1, counter trade in addition to the market. The stock exchange amounted to $1.01 before the agreement was announced Wednesday, giving 5to1 a market value of $ 36 million, based on the shares of the company from May 10. This means that Yahoo buys 5to1 to approximately 20 per cent of the market value of 5to1 discounts.
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