Yahoo (s YHOO) and some of the other web giants have been kicking the tires on New York-based URL shortening service Bit.ly, according to a few people in the know. The interest in the company has increased over the past 60 days or so. Conversations are said it to be in early stages, and the company raised about $3.5 million ($2 million in venture capital and $1.5 million in debt) in March 2009 from Ron Conway and other super angel investors. Bit.ly declined to comment for the story.
Yahoo has become increasingly acquisitive, as indicated by its interest in snapping up Dennis Crowley’s Foursquare for a rumored $110 million; the interest in Bit.ly seems to be continuation of that trend. Those in the know say that while Yahoo has intent to buy, the company needs to be more aggressive, especially considering its larger, richer rivals. It was reported earlier that Bit.ly was in talks with Google and Twitter and was seeking about $100 million, but I have not heard that amount in context of the Yahoo-related deal.
To understand Yahoo’s thought process, check out Liz Gannes’ post Yahoo’s Big Plan for the Social Web in 2010: Aggregate it. She points out that since “Yahoo users’ primary mode is consumption,” it’s not a surprise the company is trying to find ways to make that consumption mode more interactive:
What Yahoo wants to do is aggregate its users’ activities from around the web. The Facebook Connect integration is the first in a string of coming deals with other social sites… And now, at the center of Yahoo’s new open social strategy, is a product called Yahoo Updates, which consists of activity streams shown in Yahoo Mail, on its front page, in Yahoo Messenger clients and on its toolbars. They are already functional; users receive a feed of updates from their contacts’ participation on Yahoo media properties when they comment or rate a story, for example. So when a normal user goes about their business chatting with their friends or reading their email, they’ll also see a stream of their friends’ social activities and updates taking place on Yahoo or elsewhere.
Like many others, Yahoo knows it needs to figure out a way to participate in the emergent (near) real-time and location-aware web. Having jettisoned its search business, the company needs to remake itself as a next generation web media company. From that perspective, Bit.ly is a good fit. Last year, I wrote a post titled, Why Bit.ly will upstage Digg:
The most important aspect of Bit.ly is not that it can shorten URLs. Instead, its real prowess lies in its ability to track the click-performance of those URLs, and conversations around those links. It doesn’t matter where those URLs are embedded — Facebook, Twitter, blogs, email, instant messages or SMS messages — a click is a click and Bit.ly counts it, in real time.
And for precisely those reasons, Bit.ly is getting the attention of a lot more potential suitors.