Yahoo Wants to Invest Serious Cash in Snapchat

Reports say discussions are taking place

Yahoo is looking to buy a piece of Snapchat with an investment that values the hot messaging app at about $10 billion, according to reports. Yahoo is among a number of venture capital firms, including heavyweight Kleiner Perkins Caufield and Byers looking to infuse $20 million into Snapchat.

Yahoo is rich with cash after selling $5 billion worth of Alibaba stock in that company’s public offering. In 2005, Yahoo invested $1 billion in Alibaba, now an e-commerce giant in China, and it still maintains shares worth nearly $40 billion.

Just last week, an activist investor urged Yahoo to not spend its Alibaba windfall on the tech darling of the day and instead focus on a merger with AOL. 

It seems Yahoo’s CEO Marissa Mayer has other plans. She has been on an acquisition spree since taking over, most notably paying $1.1 billion for Tumblr.

While it appears any investment in Snapchat would be relatively small, any deal could give Yahoo access to one of the fastest-growing mobile apps with more than 100 million users.

The Wall Street Journal was the first to report on the potential investment, saying Snapchat and Yahoo had held talks. The Journal also noted that Yahoo just bought another messaging app, MessageMe, in an acquisition said to be mainly about acquiring talent.

Mayer’s moves have been under scrutiny, particularly after last week’s letter from investment firm Starboard, which announced it had a large stake in the Internet company and would push for fewer investments and more cost savings.

Starboard also is an investor in AOL and has designs on pairing the two companies, possibly even if it meant that Yahoo would play second fiddle in a merger.