Yahoo purchased adult video site xHamster for $400 million today in an effort to extend its brand into youth culture.
The combined cash and stock deal comes just days after it spent $1.1 billion to acquire Tumblr, a social blogging service which is also used mostly for pornography.
In a statement released to the press, Yahoo CEO Marissa Meyer explained that while the move may be controversial, it offers the best hope of reversing the declining company's fate.
"Yahoo is behind its competitors in appealing to young users and in online video," the statement reads. "Today's purchase of xHamster allows us to simultaneously address both of these problems by acquiring one of the most popular video sites on the internet amongst young people aged 18-35.
"The combined power of Tumblr and xHamster will finally make Yahoo a leader in one key niche of the Internet: the online adult entertainment industry. We've failed in email, social networking, search, display advertising, web hosting, podcasting, job listings, photo sharing and ecommerce. This is our last chance."
Double Penetration
Founded in 1995, Yahoo was one of the first internet companies and pioneered the once-dominant web portal business. It has struggled, however, to adapt its business to the disruptions presented by companies like Google and Facebook.
Revenues have been declining or stagnant for years, the company's stock price is only at one-third of its all time high, and it now ranks only 494 on the list of Fortune 500 companies.
Longtime Google executive Meyer was brought in to help fix the ailing company, and has so far succeeded in improving investor sentiment. But observers are skeptical that her recent move towards the more risqué corner of the internet will succeed.
"I was already skeptical major advertisers were going to put ads on Tumblr blogs like "Bendmeover," says Jack Horner, a technology equities analyst for Citigroup. "But I'm sure they aren't going to want to have their brand next to videos called 'Monster Big Naturals' or 'Double Teamed and Facialized.'
"This is a disaster for Yahoo's display advertising business. But since that wasn't going too well anyway, maybe a switch to adult could boost margins."
xHamster is one of the most visited sites on the Internet, ranking 44th in the world according to Alexa, a web traffic data provider.
