What Is Yahoo! Getting Out of This Deal?
Say what you will about Yahoo! (NAS: YHOO) and its flagging prospects, but the company still owns an epic platform of Internet users. In a just-announced deal, music service Spotify is using Yahoo!'s 700 million active users as a rocket platform.
The agreement puts Spotify's content front and center on Yahoo! Music, and later on also across other entertainment-oriented feeds like Yahoo! Movies and the omg! celebrity gossip site.
This is obviously a big boost for Spotify. Anonymous sources tell Business Insider that the company is the second-largest digital music business these days, but still a long way behind online music king Apple's (NAS: AAPL) iTunes. Digital music is a cutthroat sector, littered with the bodies of failed competitors, and is largely unprofitable for survivors (as any Pandora Media (NAS: P) investor will tell you). Spotify will take all the help it can get to gain an edge over a sea of rivals, most of which are also privately held upstarts like Rdio, Last.fm, Grooveshark, and Slacker Radio.
It's less obvious why Yahoo! likes this idea. Putting a Yahoo!-curated app on the Spotify platform only reaches about 10 million Spotify users, most of which probably already know Yahoo! anyway.
According to the announcement, "delivering compelling premium experiences across screens" is a core value for Yahoo! and this hookup could make for "deeper user engagement." But unless Spotify is paying Yahoo! for the privilege of sharing its enormous user base (the press release doesn't say), I still don't see where Sunnyvale is going with this. Then again, the company runs under interim leadership right now, so a certain lack of long-term direction might be expected.
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The article What Is Yahoo! Getting Out of This Deal? originally appeared on Fool.com.Fool contributorAnders Bylundholds no position in any of the companies mentioned. Check outAnders' holdings and bio, or follow him onTwitterandGoogle+. The Fool owns shares of Apple.Motley Fool newsletter serviceshave recommended buying shares of Apple.Motley Fool newsletter serviceshave also recommended creating a bull call spread position in Apple. The Motley Fool has adisclosure policy.We Fools may not all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.
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