Seeking to replicate the success of its investment in Alibaba, Yahoo (YHOO) is reportedly setting its sights on Snapchat.
The internet giant is in talks to sink $20 million into the photo messaging startup in a deal that would value Snapchat at $10 billion, according to the Wall Street Journal.
The move would mark Yahoo CEO Marissa Mayer's latest attempt to keep shareholders happy while she works to revitalize the company.
Yahoo's bet on Alibaba (BABA) paid off big. It provided a massive windfall of around $5 billion (after taxes) from the Chinese conglomerate's IPO, which was the largest in history. It also gave Yahoo much needed buzz and momentum. Yahoo's stock has soared 20% in the past six months, often jumping whenever Alibaba's IPO was in the news.
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While Mayer has already indicated that she would return at least half of the proceeds from the Alibaba IPO to shareholders, presumably in the form of a stock buyback, analysts have been watching closely to see what she plans to do with the rest of the cash.
As CNNMoney's Paul La Monica wrote last month, it's "put up or shut up time" for Mayer and Yahoo.
The investment in Snapchat, although less than 1% of the Alibaba windfall, is the first big move.
There are already questions about whether it even makes sense. Snapchat is no Alibaba.
The app, though wildly popular amongst younger users, doesn't advertise and therefore brings in no revenue. Its technology isn't necessarily hard to replicate. And since messages sent through the app only exist temporarily, it can't mine the communications of users for marketing insights the way other social networks do (that is if it keeps its promise to regulators).
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Alibaba, by contrast, booked a profit of nearly $2 billion in the second quarter and is predicted to grow rapidly along with the Chinese middle class.
But Mayer is under pressure to prove that Yahoo's turnaround is the real thing. She's made a string of acquisitions in recent years, including the purchase of blogging site Tumblr and Summly, the news aggregation site created by a British teenager. There's even rumors that Yahoo could buy AOL, a move supported by at least one prominent investor.
She's also made a big effort to focus more on mobile, social, and video.
Interestingly, Yahoo also bought messaging app MessageMe late last week and then immediately shut it down. That strategy begs the question of whether Yahoo has its own plans in the mobile messaging space.
Of course, it is possible that a Snapchat investment could pay off for Yahoo, although the reported stake is relatively small. The startup has experienced impressive user growth in a short period of time and already has venture backing from some high profile investors with proven track records of success.
A Yahoo spokeswoman declined to comment Monday.
--CNNMoney's Paul LaMonica and James O'Toole contributed to this report.
