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How Yello Mobile Ate 61 Startups In One Year



So many eyeballs, so little growth. Or so Yahoo’s recent performance under Marissa Mayer could be summarized. Joining Yahoo as its head in 2012, Mayer quickly made a splash with a rapid series of acquisitions, from the billion dollar purchase of Tumblr to the $30 million acquisition of Summly.

The performance of that strategy has been lackluster. While Yahoo has acquired nearly 50 companies during Mayer’s tenure, its financial results have done little to persuade investors that the company has found a path to growth.

That has raised questions about the viability of the app studio model. Unlike platform product companies like Facebook, app studios rely on monetizing a portfolio of products. Among mobile app companies, this business structure is most common in the games industry, and indeed, there are certain parallels to Hollywood movie studios with their focus on entertainment franchises.

There is one startup, though, that is proving that an app studio model can exist outside of pure entertainment, and incredibly, is devouring startups at an average rate of almost 5 per month.

Yello Mobile, a Korean startup founded in 2012, has now acquired a total of 74 apps for its portfolio, 61 of which were acquired just in the last year. And the company shows no sign of slowing down, pushing to conduct about the same number of transactions in 2015 as it did last year.

The company is taking advantage of a unique moment in the market in its home base of Seoul and throughout Asia. Mobile usage has skyrocketed throughout the region, none more so than in South Korea, where smartphone penetration is nearing 75% of the population, and the country is already transitioning its wireless infrastructure to 5G technologies.

The rapid adoption of mobile in the country has not been matched by its leading technology and service providers. That means there are huge gaps between the needs of users and the offerings of incumbent companies. Lee Sang-hyuck, the CEO of Yello Mobile says that “There are many niche markets beyond gaming and messaging that are underserved and underdeveloped in Asia. We are targeting those aggressively, to support the stars in each vertical and also help develop those opportunities.”

The company targets startups that are 2–3 years old, and thus have proven market traction, but are perhaps struggling to grow. Yello’s key skill is taking these existing properties and growing them even more rapidly. For example, Coocha collects data on various ecommerce merchants and presents this information to users in its app. It had 850,000 monthly active users when the company was acquired by Yello in May 2013, and now has almost 3 million users. Perhaps more importantly, its sales revenues have gone from $160,000 to $810,000 according to the company.

While there is some diversity in the revenue models of the apps, advertising remains core to most, and the company has prioritized building that capability through its acquisitions. Yello owns the second largest mobile ad network in Korea, a startup known as Cauly or Future Stream Networks, which is currently used by 12,000 apps. Yello acquired the company for $27 million earlier in 2014, and already has already grown its profits from $100,000 per month to $1.2 million.

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