Quantcast

Yahoo prepares to buy Tumblr for up to $1.1 billion

By Charles Arthur, The Guardian
Sunday, May 19, 2013 17:26 EDT
google plus icon
A red headed woman holds a stack of money. Photo: Shutterstock.com.
Topics:
 
  • Print Friendly and PDF
  • Email this page

Marissa Mayer, the former Googler who is now chief executive of Yahoo, is poised to create yet another nothing-to-riches tale in the web industry with a rumoured $1.1bn (£720m) acquisition of the blogging site Tumblr.

Mayer called Yahoo’s board together on Sunday afternoon to discuss the company’s latest attempt to regain the glamour it once held, and the word from Sunnyvale, California is that the board has given its approval. Tumblr was only founded in 2007, by David Karp, then 21, in his bedroom in his mother’s apartment in New York. Within a fortnight it had 75,000 users; by January 2012, there were 42m blogs on the site; today, there are around 110m, and the investors who have poured $125m into the company include Sir Richard Branson.

With a high-profile press conference scheduled for Monday afternoon at a location in a lounge in New York’s Times Square, just a couple of miles from Tumblr’s headquarters, nobody expects Mayer will turn up empty-handed. According to the Wall Street Journal on Sunday evening, the Yahoo board have agreed to pay $1.1bn for Tumblr and will let it continue to operate as an independent business.

Yahoo declined to comment ahead of the announcement, but pointed out that it will be streamed live. That’s something the company previously only did (in audio) for its quarterly financial results. Which points to Mayer being aware of its significance, and wanting the world’s media to realise it too.

For Yahoo, capturing the white-hot blogging site which is so easy to use that it repeatedly and effortlessly captures the zeitgeist (such as “White Men Wearing Google Glass“) could catapult it back into the top flight of contenders, in a web world that has become hugely more complicated since it was set up in March 1995 – before Google and nearly a decade before Facebook.

Tumblr’s attraction is how easily people can create their own web presence; they can go from zero to blogging in less than a minute, collecting pictures, and posting stuff effortlessly. Unlike Facebook, it’s anonymous; yet it has powerful search for finding “similar” content, which is often reshared. As the network grows, that internal sharing grows and grows.

Web measurement company Quantcast says Tumblr had 217m global users in the past month, and was the US’s 24th most popular site with about 75m US users. For Yahoo, it says the figure is about the same: 75m US monthly users.

But for Tumblr, Yahoo could bring the skills at pulling in advertising sales it has been sorely missing. It also looks like something of a shotgun marriage. Tumblr only has a few months’ worth of cash left, according to industry gossip, and has been shopping itself around the industry for a little while. It pulled in $13m of advertising in 2012, but is spending far more than that.

It hoped to hit a $100m revenue target for 2013 but that seems unlikely now, making its purchase a potential lifesaver for both companies, and for investors.

Unlike Facebook, Tumblr has been slow to pull in advertisers. Speaking to the Guardian in January 2012, Karp expressed disdain for how other sites use ads. Of Google-owned YouTube, he said: “They take your creative works – your film that you poured hours and hours of energy into – and they put ads on top of it. They make it as gross an experience to watch your film as possible. I’m sure it will contribute to Google’s bottom line; I’m not sure it will inspire any creators.”

At Yahoo, Mayer was only appointed 10 months ago, in a move that looked both audaciously clever, and a last throw of the dice. She was at the time one of the longest-serving staff at Google, having been there 13 years, but had apparently been bypassed for the high-profile jobs. Yahoo, meanwhile, had seen revenues slump, and a revolving-door procession of CEOs.

“Yahoo will be able to offer advertisers a full set of channels that serve most demographics,” commented Ben Thompson, who works in the technology industry on his Stratechery blog. “That’s where the synergy is; I don’t think anyone expects Tumblr users to suddenly develop an affinity for Yahoo.”

One tricky question that Mayer will have to face up to: if it completes the acquisition, what should it do about all the porn? It’s an open secret that a significant proportion of Tumblr blogs are “not safe for work” viewing. But cleaning out the porn might not be popular with users.

The big fear though is that Tumblr will turn out to be an updated version of Geocities. When Yahoo bought that in January 1999, it was the third most-visited site on the internet, because of its collection of “communities” where people could create their own sites. Though it became famous for users’ garish choice of page colours and blinking “Under Construction” logos, Geocities was also a resource many loved. But the company arguably never got back the $3.57bn it paid – entirely in stock, at $36 per share; today the share price is around $27.

In 2009, Geocities was shut down, and the entire site simply wiped from the internet. For Mayer and Karp, and millions of Tumblr users, the hope must be that history won’t repeat itself.
——

Photo: Shutterstock.com.

 
 
 
 
By commenting, you agree to our terms of service
and to abide by our commenting policy.
 
Google+