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The cure to Yahoo!'s (Nasdaq: YHOO  ) dot-com stagnancy may involve a shopping spree.

"I can guarantee you there will be some acquisitions," CTO Ari Balogh told those attending the Reuters Global Technology Summit yesterday, addressing concerns that Yahoo! needs a little more Web 2.0 goodness.

In-house social networking solutions have failed Yahoo! in the past. Yahoo! Mash didn't even last a year. The appropriately named Yahoo! 360 has been a round trip to nowhere.

Two years ago, Yahoo! turned heads when it called its Yahoo! Mail platform a "dormant social network." At the time, it boasted 250 million accounts -- a big number, especially since Facebook didn't land its 200 millionth active user until last month.

Alas, that free-mail social network is still snoring louder than Rip Van Winkle.

With billions in the bank, Yahoo! can dream big, though it's unlikely to blow all that cash on Facebook. It may try to get more bang for its buck by snapping up smaller sites like LinkedIn or Time Warner's (NYSE: TWX  ) Bebo. Heck, maybe it'll even see what it would take for News Corp. (NYSE: NWS  ) to part with MySpace.

Social networking has been a tough ticket to monetize. Even the mighty Google (Nasdaq: GOOG  ) has lamented the poor performance of its ad deal with MySpace, though Yahoo!'s display advertising strengths would be a good fit with the traffic-happy site.

Yahoo! will never catch up to Google in paid search, but it doesn't have to. It can just pick off online marketers like ValueClick (Nasdaq: VCLK  ) , or local traffic specialists like Marchex (Nasdaq: MCHX  ) and (Nasdaq: LOCM  ) . 

Yahoo! isn't dumb enough to telegraph its actual targets, but telling reporters that it will go shopping is a huge admission. It sounds the dinner bell for investors willing to commit to the due diligence required to smoke out Yahoo!'s likely buy candidates.

Yahoo! knows it can't succeed alone. Now it's time to see which companies the search giant's willing to buy at a respectable premium.

Yahoo! keeps tapping the snooze bar:

Google is a Motley Fool Rule Breakers recommendation. Try any of our Foolish newsletters today free for 30 days.

Longtime Fool contributor Rick Munarriz is a fan of shopping sprees, as long as he watches his pennies. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.

Read/Post Comments (1) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 22, 2009, at 3:37 PM, SeattleBuzzKill wrote:

    I see you have a nice little loophole for your "disclosure policy".

    While the author of this article may not own stock or be a customer of any of the companies listed, MF is a customer of Marchex so of course they get described as a "local traffic specialists" when all they do is buy traffic from click farms overseas.

    The 90s are over, if you have a relationship with a company that you are hyping DISCLOSE IT.

    No wonder this site is what it is.

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