Why Yahoo Bought Koprol: Location, Location, Location

With Google's (GOOG) seemingly unassailable dominance of the search market, Yahoo (YHOO) has been trying to find a clear-cut strategy for itself. Now it looks like the company might have found some direction. Will Yahoo find its niche by providing mobile services for emerging markets?

The company has certainly been actively pursuing the space lately. On Tuesday, Yahoo announced it has bought Koprol, which provides a location-based social-networking service based in Indonesia, for an undisclosed sum. The news comes just a day after Yahoo said it had struck a deal to bring its mobile apps, such as email and instant messaging, to Nokia (NOK) phones in emerging countries.

It's an interesting approach. While emerging markets are growing at a rapid clip, it can be tough to make money in those markets, for obvious reasons. But it should be cheaper to deliver services using Web-based applications. Another plus? Mobile phones are often the primary way that users in emerging markets access the Internet.

Koprol's Potential for Yahoo

The Koprol app enables users to let friends know where they are and what's happening, see who's nearby, rate restaurants, comment on favorite hangouts and share photos. Because the app is Internet based, users can access it from any Web-enabled phone by visiting koprol.com, and that broad usability could give Yahoo an edge with its new mobile push in emerging markets.

Of course, Koprol's footprint appears fairly small at this point. But these types of location-based services are still in nascent stages, and Yahoo -- with its popular Web properties -- might well be a good partner to help boost Koprol's distribution. Koprol also has a BlackBerry-specific application and is working on versions for the iPhone and Android, for which Yahoo engineers should come in handy.

Location-based services such as Koprol are attractive because of their potential to enhance e-commerce revenues from local businesses. That potential may still be a long way off, however. One of the most popular location-based social-networking services, Foursquare, only has roughly 1 million users and has generated no revenue so far, according to The New York Times. The service, which -- rumors had it -- Yahoo had been considering buying for some $100 million last month, also enables users to share their locations with their friends.

Will buying Koprol, instead, be enough to gain Yahoo a foothold into the location-based market? Probably not. After all, other major players, including Facebook, have been working hard in this area, and Yahoo -- with its admitted execution problems -- hasn't yet proven its mastery at launching these types of services. In other words, if the company wants to be a key player in location-based social networks, it may still have to shell out for Foursquare.