Yahoo eyeing Snapchat after Alibaba success

In a bid to replicate the success of its investment in Alibaba, Yahoo is reportedly setting its sights on Snapchat, CNN Money reported.

The internet giant was discussing a $20-million deal into the photo messaging start up that would value Snapchat at $10 billion, The Wall Street Journal reported.

The move is being seen as Yahoo CEO Marissa Mayer's latest attempt to keep shareholders happy as she worked to revitalise the company.

The company's bet on Alibaba provided a colossal windfall of around $5 billion (after taxes) from the Chinese conglomerate's IPO, which was the largest in history and also gave Yahoo much needed buzz and momentum.

Yahoo's stock had soared 20 per cent over the past six months, often jumping whenever Alibaba's IPO was in the news.

While Mayer had already indicated that she would return at least half of the proceeds from the Alibaba IPO to shareholders, presumably in the form of a stock buyback, analysts had been watching closely at what she would do with the rest of the cash.

Meanwhile, since taking over charge as Yahoo CEO in July of 2012, Marissa Meyer had been busy with over 20 acquisitions, including an expensive $1.1 billion purchase of Tumblr. 

She had not been shy when it came to acquiring assets that she thought would help her turn Yahoo around. The additions unfortunately had yet to make a significant impact to improve the company's online advertising business.

In the backdrop of the Alibaba windfall, investors were trying to make out what Meyer would do with the proceeds.

Last week Starboard Value had sent a letter to Meyer urging her to sell Yahoo's remaining stake in both Alibaba and Yahoo Japan even as it combined with AOL, a move that would ultimately amount to AOL purchasing Yahoo "with AOL as the surviving entity in a combination," (See: Yahoo likely to reap $11 bn in potential break-up).

According to commentators this comes after Starboard's 2012 bid to shake up AOL, when AOL thwarted a bid by the group to again entry into the board.

Although AOL was able to win a proxy vote that allowed its board of directors to continue, CEO Tim Anderson was forced to follow a number of Starboard directives.