The acquisition, expected to close in this year's third quarter, is intended to improve Yahoo's ability to generate original content that drives traffic to its Web sites and search engines and leads to online ad revenue growth.
"Together, we'll create more content around what we know our users care about, and open up new and creative avenues for advertisers to engage with consumers across our network," said Yahoo CEO Carol Bartz in a statement on Tuesday.
Yahoo plans to broaden Associated Content's scope beyond its current U.S. focus. Yahoo didn't disclose financial terms of the deal.
Associated Content, founded in 2004, has about 16 million unique monthly visitors and its editorial staff reviews more than 50,000 articles, images, and audio and video clips every month, according to Yahoo.
Yahoo rival AOL has been busy over the past year beefing up its ability to create original content, which is key to the strategy its CEO, Tim Armstrong, has put in place to jump-start the newly independent company's sputtering revenue engine.
As part of the plan, AOL has invested in building up its editorial staff, and is counting heavily on its Seed.com content management system for writers, photographers and videographers to find freelance assignments from AOL. The company also has "hyper local" news provider Patch and event city guide Going.
IDC analyst Karsten Weide called the acquisition a "smart move" by Yahoo. "It will fill gaps in certain topical niches in their content offering, especially in news and finance. That in turn will attract more audience and advertising revenue," he said via e-mail.
"It is also a defensive move against AOL and Demand Media, who run similar services," Weide added.
Analyst Greg Sterling, from Sterling Market Intelligence, said the deal is consistent with Yahoo's growing emphasis on content. "There are tons of page views here that create new ad inventory for Yahoo display advertising and for search volumes," Sterling said via e-mail.
However, it could also be a challenge for Yahoo to manage such a large stable of freelancers, Sterling added.
