Yahoo and other web giants have been kicking the tires on New York-based URL shortening service Bit.ly, according to a people in the know. Like many others, Yahoo knows it needs to figure out a way to participate in the emergent real-time and location-aware web.

Yahoo 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.

Related content from GigaOM Pro (sub req’d): As Twitter Develops, Developers Quiver in Fear & Why Google should fear the social web

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  1. Sardar Mohkim Khan Monday, July 19, 2010

    I agree totally with your last point on why bit.ly gets the larger chunk of the cake – it wont surprise me if a major player on the Web pockets it for a high price..

  2. I have little doubt of their value but what in the heck would Yahoo do with it? I don’t get the connection to Yahoo at all. Yahoo News perhaps?

  3. It would appear to me that the url shortening service (bit.ly) became popular through twitter, and if twitter decides to come out with their own, who would really use the service?

    Not a smart purchase in my eyes! At least not for 100 million!

    1. Twitter did come out with their own shortener, didn’t they? What makes bit.ly more and more a standard is the nifty plug in to Tweetdeck and other applications, as well as the tracking.

      I always push businesses to use it, so they can track.

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  6. Bill Purkins Monday, July 19, 2010

    Heh. http://OneCent.US has almost TEN times the features of bit.ly. And why do you call them New York based when their domain extension is Libyan? They got 2 million bucks in funding in 2009. Where’s it going? Well, they have nine people on their “team” and an office on 13th Street in lower Manhattan. OneCent.US at least did not resort to a foreign domain extension to lop a character off our shortened URLs. Be interesting to see if this comment makes it past moderation.

    1. Have you seen your own website? Ugh; who would want to use a service like that?

    2. A Libyan domain extension means nothing in terms of a company or individual’s base. I can purchase a .it domain in Canada, never go to Italy, never trade in Italy, or deal with Italian people. It’s simply a suffix for your web domain. The .ly was used to make the name of the company memorable and fun. No different than if Nike purchased JustDo.It. You’ve got too much time on your hands.

    3. 13th Street is not Lower Manhatan, it’s Greenwich Village. And a long way from Libya.

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  8. What an utter waste of money buying bit.ly would be. I agree with the point that it’s not that it shortens URLs, it’s that it tracks stats in real time – but guess what? So does every other URL shortener out there, and there’s about 10 million of them. In other words, building another bit.ly (that can handle the same scale of URLs and click tracking) would probably cost at most $1M for a company the size of Yahoo. Maybe they’re thinking more about the “brand” but who cares about the brand? It’s a damn URL shortener for the love of all that is holy.

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    [...] Kindle e-reader than it has traditional hardcover books. Bit.ly becomes acquisition bait — Yahoo is one of several major web players that may soon by URL shortening service Bit.ly. Since Bit.ly raised $3.5 million in new funding in March, interest in it as a possible acquisition [...]

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