NEW YORK (AdAge.com) -- Yahoo has acquired startup Associated Content for slightly more than $100 million in a deal that gives the portal new technology and a new strategy for producing low-cost media.
The deal, which will be announced later today, is part of an effort to shore up Yahoo's content offerings and underscores the increased use of low-cost, crowd-sourced content, a strategy that AOL is pursuing through its SEED content factory, as well as by Demand Media, which reportedly hired Goldman Sachs to explore an IPO this summer.
Associated is in the business of generating a great deal of freelancer-produced content that can earn as little as $5 a story, and is optimized for search. (Examples of stories include "Guide to Reducing Stress in Daily Activities" and "Five Hollywood Career Revivals Waiting to Happen.")
Associated, backed by AOL CEO Tim Armstrong, as well as VC firms Canaan Partners and Softbank Capital, had raised $21 million in venture funding. AOL had been seen as a likely buyer, but instead it launched SEED and Associated hired Allen & Co. to beat the bushes for other prospective buyers late last year.
Associated Content CEO Patrick Keane is expected to join Yahoo in the wake of the deal, and may take the top sales job vacated by Joanne Bradford, who left the company to join Demand Media in March. Mr. Keane, a veteran of CBS Interactive and Google, declined to comment.
"Combining our world-class editorial team with Associated Content's makes this a game-changer," Yahoo CEO Carol Bartz said in a statement. "Together, we'll create more content around what we know our users care about, and open up new and creative avenues for advertisers to engage with consumers across our network."
Founded by Luke Beatty in 2004, Associated Content receives more than 16 million unique users per month, according to ComScore, and the editorial staff reviews more than 50,000 pieces of content per month, according to the company. Associated manages a network of freelancers, but has also built underlying technology that predicts what kinds of content consumers want, as well as surfacing that content through natural search on engines such as Google, Yahoo and Microsoft's Bing so the library makes money over time.
Associated has also signed deals with major media publishers, such as Thomson Reuters, Cox Newspapers, Hachette Filipacchi and USA Today as they look for low-cost content beyond news to serve their audiences. Associated claims 380,000 contributors writing on a range of topics, from retirement planning to dealing with pregnancy neck pain to bugs.
The deal signals a new approach to content for Yahoo, which tried an expensive, Hollywood-style approach under former studio boss Terry Semel, but has since dialed back those efforts to low-cost production of content such as Yahoo Sports and OMG, its entertainment-focused site.
Executives close to the deal said Yahoo began looking at Associated late last year. For the quarter ended March 31, Yahoo reported revenue of $1.59 billion, flat with the same period a year ago. Yahoo reported income of $310.2 million, up from $117.6 million from the same period last year.