Technology Yahoo in Talks to Sink Some of Its Alibaba Cash Into Snapchat

Yahoo, flush with cash from selling a portion of its stake in the Alibaba Group, appears ready to bet on what it believes will be the next big Internet phenomenon.

The company has held talks to invest in Snapchat — a popular app that allows people to share photos and messages that self-destruct — people briefed on the matter said on Friday. The deal has not yet closed, some of these people added.

Should Yahoo make the investment, it will join other prominent investors, including the venture capital firm Kleiner Perkins Caufield & Byers, who have valued the service at about $10 billion.

While Yahoo is not expected to put a huge amount of money into Snapchat, the investment could give it access to the messaging phenomenon and help Yahoo become more relevant to young consumers. It would also give the company a more strategic stake in mobile technology, an area in which Yahoo has long been seen as a laggard compared with competitors like Facebook and Google.

Yahoo has been bolstered by a roughly $6 billion haul from selling a significant portion of its holdings in Alibaba, the large, fast-growing Chinese e-commerce company that went public last month. At least half of the proceeds from the sale will go toward buying back stock, but some of the money could go toward strategic acquisitions and investments.

Talks between Yahoo and Snapchat gained steam late this summer, some of the people briefed on the matter said.

In that vein, Yahoo confirmed that it recently bought MessageMe, a small photo and text-messaging start-up in San Francisco. For Yahoo, it is another in a string of acquisitions of small mobile start-ups, which began soon after Marissa Mayer, Yahoo’s chief executive, took the top position in 2012. That strategy could expose Yahoo to criticism from shareholders leery that the Alibaba windfall will lead to another spending spree. Though Snapchat has millions of regular users, who send hundreds of millions of photos and videos every day, it has yet to generate any revenue.

The young company attracts attention in Silicon Valley circles, particularly because of its popularity in the much coveted millennial demographic. Snapchat, which is based in Venice, Calif., has raised more than $160 million in venture capital; last fall, the company spurned a $3 billion acquisition offer from Facebook.

Snapchat has been experimenting with ways to distribute content on its popular network. It has worked with musicians, large brands and popular users to figure out different ways to distribute “snaps” — the company’s name for its disappearing messages — that will keep its members coming back regularly.

This could be where the two companies see eye to eye. Ms. Mayer has repeatedly said that Yahoo is a “digital content company at its core” and has worked to increase its content offerings.

The company has commissioned two television-length comedy series that will air exclusively on Yahoo’s mobile apps and website. Last fall, Ms. Mayer hired Katie Couric, the seasoned journalist who has been the anchor of news programs for NBC, CBS and ABC, to be Yahoo’s global news anchor.

Ms. Couric recently attended a small private party thrown by Snapchat’s founders during Advertising Week, an annual media industry event held in New York, according to a person familiar with the guest list.

Representatives for Yahoo and Snapchat declined to comment or did not respond to requests for comment on the talks, which were reported earlier by The Wall Street Journal.