Yahoo! Acquires Video Chat Startup OnTheAir, Attention Turns to Mobile

Yahoo (Nasdaq: YHOO) has acquired the California-based startup OnTheAir for an undisclosed amount in its continued effort to snatch up top mobile development talent and reinvent its flagging Internet presence for the smartphone age.

With just five founding members (Erik Goldman, Josh Schwarzapel, Abel Allison, Dan Hopkins, and Mike Kerzhner) OnTheAir is a tiny company, even by startup standards. But since the company launched in March, it attracted the attention of popular technology outlets such as TechCrunch for drawing talent from prominent tech companies like Apple (Nasdaq: AAPL), Facebook (Nasdaq: FB), Google (Nasdaq: GOOG) and Meebo.

But since forming a private company, OnTheAir failed to gain significant traction with its core product -- an app that lets users set up make-shift webinars that were available to live-stream for large Internet audiences. Its unique characteristic was that the online service could potentially function as a web-friendly version of the call-in radio show, allowing listeners to drop in and out of larger web-chats seamlessly during a larger conversation.

The idea didn’t lure in many investors after the company’s initial round of seed investing, however. According to the TechCrunch profile from March, the company managed to raise $880,000 in initial investing but failed to attract further investment in later fundraising efforts.

OnTheAir announced the news on its website Tuesday, saying that the original dream for the company was to build a service "that made a difference in the daily lives of millions."

"When we first met with the team at Yahoo, it was clear that everybody there is committed to making mobile products the backbone for the world's daily habits," the team wrote.

OnTheAir admitted that it has not "yet attained our dream of building a widespread daily use product," the team said in its statement. But joining forces with Yahoo, "there are big things to be done and great products to be built, and we're thrilled to be a part of it," the statement said.

"Hiring the most talented mobile product thinkers and engineers is a big priority for us moving forward," Yahoo's senior vice president of emerging products and technology, Adam Cahan, said in a statement. “Abel, Dan, Erik, Josh, and Mike are a great addition to Yahoo!, and we can’t wait to work with them to create the best possible mobile experience for our users.”

Yahoo! shares jumped just over two percent during trading Tuesday, closing at $18.93 per share.