Messaging giant Yahoo is planning to invest in messaging app Snapchat, making use of a part of the proceeds from the sale of shares in the Alibaba Group.
The Wall Street Journal,citing people familiar with the matter, reported that the company committed itself to an investment in the fast-growing messaging start-up at a $10bn (£6.2bn, €7.9bn) valuation. One of the sources said Yahoo will invest about $10m in Snapchat.
Snapchat has been working to secure capital from various venture capital firms, money managers and other companies over the past few months, WSJ noted.
Institutional Venture Partners and DST Global, two previous Snapchat investors, are also planning to make further investments in the company, the newspaper reported, citing two people familiar with the matter.
With the new investment, Yahoo is looking to repeat its success with Chinese ecommerce giant Alibaba.
In 2005, Yahoo paid $1bn for a 40% stake in the company, and the investment has grown into tens of billions of dollars, as Alibaba listed its shares in the US.
The company generated more than $5bn by selling part of its stake in Alibaba during its initial public offering. Yahoo CEO Marissa Mayer earlier made a commitment to pay at least half of the proceeds to shareholders.
The company is expected to go for a range of acquisitions and investments with the remaining cash. It earlier acquired another mobile messaging company, MessageMe.
Three-year old Snapchat, which is yet to generate revenues from its operations, is also expected to be a riskier investment for Yahoo. The mobile application has unique features, letting people to send messages, photos and video that disappear after 10 seconds.
Having more than 100 million users, the start-up is reportedly planning to launch a new service for vanishing news articles and advertisements in the coming weeks.