Was Tumblr really worth $1.1 Billion?

[rell826]

[h1]Yahoo buys Tumblr, promises to not 'screw it up'[/h1]By Chris Isidore @CNNMoneyTech May 20, 2013: 9:44 AM ET

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Yahoo CEO Marissa Mayer promised Monday not to screw up Tumblr, the blogging site Yahoo purchased for $1.1 billion.

NEW YORK (CNNMoney)
[h2]Yahoo announced a $1.1 billion deal for blogging site Tumblr early Monday, and said it "promises not to screw it up."[/h2]
The deal, which had been rumored since last Thursday, will help Yahoo to tap into the younger, active online user base at Tumblr. But the deal raises concerns among some Tumblr fans that the site could end up being cluttered by the ads that brings in billions of dollars a year to Yahoo. Tumblr CEO and founder David Karp has resisted the use of traditional display advertising on Tumblr to this point.

To answer those worries, Yahoo said that Tumblr will be independently operated as a separate business with Karp staying on as CEO. Yahoo CEO Marissa Mayer posted her own Tumblr post to try to assure fans of the site they need not panic. In a call with investors and analysts Monday, Mayer referred to the deal as a "game changer" for Yahoo. She said there will be no Yahoo branding on Tumblr.

But while she sought to assure Tumblr bloggers and readers that the site will stay the way they like it, she also promised analysts that the deal will give Yahoo a chance to "monetize" Tumblr in a way that "is meaningful ... to the user experience."

Karp also sought to assure Tumblr bloggers.

"Our team isn't changing. Our roadmap isn't changing," said Karp in a statement. "Tumblr gets better faster with more resources to draw from."

Related: Yahoo's $1.1 billion acqui-hire of David Karp

Tumblr has 300 million monthly unique visitors and 120,000 sign-ups every day, with about 900 posts a second. As big as that is, it is dwarfed by Yahoo, which posted revenue of about $5 billion last year and a profit of $825 million excluding special items. Yahoo had $5.4 billion in cash on its balance sheet, according to its most recent quarterly earnings statement.

Yahoo Chief Financial Officer Ken Goldman said that while the deal is not expected to add much to Yahoo results this year, he forecasts material gains in both profits and revenue by next year. The deal is expected to close in the second half of this year.

The deal is the biggest move yet by Mayer, the Yahoo CEO who has shaken up the company in less than a year on the job. She's rolled out a new homepage, a redesigned Yahoo Mail and refreshed Flickr, its photo-sharing service that some critics said had been dying on the vine before Mayer's changes.

Under Mayer's watch, Yahoo has also purchased mobile start-up Stamped for its engineering staff. Yahoo shut down Stamped after the acquisition and put its staff to work on Yahoo projects. Mayer also made a splash with Yahoo's $30 million purchase of Summly, a news summary app created by 17-year old Nick D'Aloisio.

Related: Five reasons Yahoo is making a $1.1 billion mistake

But Mayer has also been criticized for some of her moves since she left Google to become CEO of Yahoo, especially her decision that Yahoo employees could no longer work from home.

Mayer is scheduled to appear at an event in New York later Monday. It is unclear if she will only be talking about the Tumblr deal or if Yahoo has something else to announce as well.

Shares of Yahoo (YHOO, Fortune 500) were higher in early trading Monday. The stock is up more than 33% this year as investors bet that Mayer will be able to turn around the company, which has faced stiff competition from Google (GOOG, Fortune 500), Facebook (FB)and AOL (AOL) in the past few years. Yahoo still trails Google widely in the online search market, despite a partnership with Microsoft (MSFT, Fortune 500).

First off, congrats to the young CEO that got over on Yahoo with this deal. Unlike Facebook (despite what NT thinks) and Twitter, Tumblr doesn't have the appeal or staying power that the mentioned already have. Yahoo is hoping that the young demographic, most of which is a niche group, will help them generate revenue. As you already know, Tumblr doesn't have any ad space so its very difficult for it to generate revenue. Its already been pointed out that its losing money; $2 for every dollar it earned. Traffic gets pointed out, but when you're not drawing revenue from the reported number which could be influenced by bots, etc. what do they really mean? This deal smells of a mom trying to be hip and a company trying to feign off mediocrity.

 

[royal assassin]

First off, congrats to the young CEO that got over on Yahoo with this deal. Unlike Facebook (despite what NT thinks) and Twitter, Tumblr doesn't have the appeal or staying power that the mentioned already have. Yahoo is hoping that the young demographic, most of which is a niche group, will help them generate revenue. As you already know, Tumblr doesn't have any ad space so its very difficult for it to generate revenue. Its already been pointed out that its losing money; $2 for every dollar it earned. Traffic gets pointed out, but when you're not drawing revenue from the reported number which could be influenced by bots, etc. what do they really mean? This deal smells of a mom trying to be hip and a company trying to feign off mediocrity.

i agree but let's take another view on it.  maybe they turn tumblr into something else altogether?  i mean it's yahoo so probably not, but somehow they've stayed afloat all these years so maybe they view tumblr as a new way to gain some ground.

 

[sorkoram]

Nope, don't think it was worth it. It's going to look a lot like the Fox-MySpace deal.

If they want to reach that target demographic, it'll have to be through a mobile-based app rather than an actual site and Tumblr has major competition already.

 

[rell826]

[h3]Rough and Tumblr[/h3]May 19th 2013, 22:22by M.G.| SAN FRANCISCO

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AT A recent conference, Ken Goldman, the chief financial officer of Yahoo, admitted that the internet giant had an ageing audience and was looking for things to “make us cool again”. The firm's senior executives appear to think Tumblr can give it a shot at rejuvenation. According to various media reports, Yahoo is likely to announce tomorrow that it is paying $1.1 billion for the popular blogging service. (Editor's update (May 20th, 12pm GMT): Yahoo announced the deal on Monday morning.) Other companies like Facebook are said to be interested in Tumblr, but Yahoo is thought to be the preferred bidder.

It is not hard to see why Tumblr has attracted the internet giant's attention. The business, which was launched in 2007, is hugely popular and many of the service’s users are young folk who like to share everything from their latest fashion tips to pictures of cats with their heads encased in bread (yes, really). Tumblr has grown rapidly and now has some 117m unique monthly users according to ComScore, a research firm. It manages 108m blogs and hosts 51 billion posts.

Tumblr’s sizeable audience has attracted the attention of Marissa Mayer, the boss of Yahoo, who took over the reins at the internet firm last year. Her brief has been to try and turn around a company whose share of the online advertising market is being rapidly eroded by the likes of Facebook and Google. In the first quarter of 2013 Yahoo’s revenue shrank 11%, to $1.1 billion.

In a bid to reignite growth Ms Mayer has spruced up some of Yahoo’s ageing products, including Flickr, a popular photo-sharing service, and has taken the company on an acquisition spree. In March, for instance, the company forked out $30m for Summly, a company founded by a 17 year-old that makes apps that summarise news stories. And more recently it courted Dailymotion, a French video site, only to back away when the French government kicked up a fuss about an American firm acquiring one of the country’s start-up crown jewels.

The common thread here is Ms Mayer’s firm belief that Yahoo needs to make headway in new areas such as mobile services and online video if it is to prosper. The firm has also been looking at social networks and other online-sharing services, which has brought it to Tumblr. The big question is whether it makes sense to fork out a whopping $1.1 billion for a company that is said to have made just $13m of revenue last year.

Among other things, Yahoo will probably argue that it can speed up Tumblr's expansion by promoting it to Yahoo's 700m unique monthly users. It will also point out that it has the know-how and resources to help the blogging service mint money from online advertising. And it may drop hints that Tumblr executives can help it rethink other areas of its business to make them more social.

Critics have been quick to point out that advertisers are unlikely to want their ads to appear alongside some of Tumblr’s content, notably numerous blogs that feature pornographic content. They have also been pointing out that a big part of Tumblr’s appeal is that its bosses have not let the service become overrun with advertising. If Yahoo starts to pump in huge numbers of ads, people may abandon the service in droves.

True, but if Yahoo manages the acquisition carefully it could turn out to be a smart move. Plenty of folk predicted a mass exodus from Instagram, a photo-sharing service, after Facebook snapped it up for $1 billion last year. But the social network has managed to develop the service without making users head for the exit. If Yahoo can pull off a similar feat with Tumblr, then it will certainly appear cooler to its shareholders.

[h1]Yahoo to Buy Tumblr for $1.1 Billion[/h1][h6]By MICHAEL J. de la MERCED, NICK BILTON and NICOLE PERLROTH[/h6]
The board of Yahoo, the faded Web pioneer, agreed on Sunday to buy the popular blogging service Tumblr for about $1.1 billion in cash, the companies announced Monday, a signal of how the company plans to reposition itself as the technology industry makes a headlong rush into social media.

The deal would be the largest acquisition of a social networking company in years, surpassing Facebook’s $1 billion purchase of Instagram last year.

For Yahoo and its chief executive, Marissa Mayer, buying Tumblr would be a bold move as she tries to breathe new life into the company. The deal, the seventh since Ms. Mayer defected from Google last summer to take over the company, would be her biggest yet. It is meant to give her company more appeal to young people, and to make up for years of missing out on the revolutions in social networking and mobile devices. Tumblr has over 108 million blogs, with many highly active users.

Yet even with all those users, a basic question about Tumblr and other social media sites remains open: Can they make money?

Founded six years ago, Tumblr has attracted a loyal following and raised millions from big-name investors. Still, it has not proved that it can be profitable, nor that it can succeed on mobile devices, which are becoming the gateway to the Internet. Even Facebook faces continued pressure from investors to show it can increase its profits and adapt to the mobile world.

“The challenge has always been, how do you monetize eyeballs?” said Charlene Li, the founder of the Altimeter Group, a consulting firm. “Services like Instagram and Facebook always focus on the user experience first. Once that loyalty is there, they figure out how to carefully, ideally, make money on it.”

If the deal is approved, Ms. Mayer will face the challenge of successfully managing the takeover, given Yahoo’s notorious reputation for paying big money for start-ups and then letting the prizes wither. Previous acquisitions by Yahoo, like the purchase of Flickr for $35 million and a $3.6 billion deal for GeoCities, an early pioneer in social networking, have been either shut down or neglected within the company.

Because of this, Ms. Mayer will face pressure to keep Tumblr’s staff, led by its founder, the 26-year-old David Karp, who dropped out of high school as a 15-year-old programmer. It is unclear whether all of Tumblr’s 175 employees, based in New York City, will move over to Yahoo.

At the same time, analysts and investors are likely to question whether buying a site that has struggled to generate revenue makes sense.

“This is not an inexpensive acquisition, but they’re willing to pay to get back some of what they’ve lost,” said Colin Gillis, an analyst at BGC Partners. “They want to be hip.”

In her short tenure as chief executive, Ms. Mayer has bought a string of tiny start-ups. Most of those were aimed at buying engineering talent that could help freshen Yahoo’s core products, like mail, finance and sports, as well as build out new mobile services.

Ms. Mayer has had ambitions to hunt bigger game, armed with $4.3 billion in cash from selling half of Yahoo’s stake in the Chinese Internet titan Alibaba.

She has had conversations with a number of other big-ticket targets, like Foursquare, a mobile app that lets users find nearby restaurants, stores and bars, and Hulu, the video streaming service, according to people with knowledge of those discussions who were not authorized to speak publicly.

Tumblr brings something that Ms. Mayer has sought for some time: a full-fledged social network with a loyal following. The start-up claims more than 100 million blogs on its site, reaching 44 million people in the United States and 134 million around the world, according to Quantcast.

But in some ways, Yahoo isn’t pursuing users — it already claims 700 million, one of the biggest user bases on the Web — but products and services that would again make it a central destination. Once the biggest seller of display ads in the United States, Yahoo has lost market share to the likes of Google and Facebook. Its share of all digital ad revenue tumbled to 8.4 percent last year, from 15.5 percent in 2009, even as total advertising spending grew, according to eMarketer. Google now claims about 41 percent.

The company also missed the shift from the Web to smartphones and tablets. It waited a significantly long time to roll out apps for its most popular services, missing out on chances to harvest users to competitors like Google and Apple.

And while Yahoo has managed to grow internationally, it has struggled to make its familiar brand relevant again. Until a recent home page renovation, the company’s main page felt claustrophobic, with ads and content jumbled together.

Tumblr’s trove of users and pages could provide fertile new ground for Yahoo’s ad operations, with what industry experts say is a bounty of unsold ad inventory. Mr. Karp of Tumblr had eschewed advertising, favoring a minimalist policy, starting to serve users ads only last May.

Mr. Karp, the C.E.O., is expected to get nearly $250 million from the deal. Spark Capital, a venture firm in Boston, has been involved in five investment rounds of Tumblr’s financing and is expected to make tens of millions of dollars from the deal.

Yet it is not clear how much Tumblr can help Yahoo reach its goals. The blogging site burned through an estimated $25 million in cash last year, and struggled to raise additional money at an acceptable valuation, according to people briefed on the matter who were not authorized to speak publicly about it. That prompted Mr. Karp to begin deal discussions with a number of companies, including Facebook, Microsoft and Google, though nothing came of those talks.

Yahoo and Tumblr have been in serious talks since last week, culminating in the Yahoo board’s vote to approve the deal on Sunday morning.

The blogging site has been trying to create new ad efforts like interactive campaigns, rather than using standard clickable ads, with mixed success. It has set a revenue goal of $100 million for this year; the company reported only $13 million for the first quarter and reported $13 million for 2012.

Despite its ranking as the 24th most viewed Web site on the Internet, according to Quantcast, Tumblr has yet to translate that into success on mobile devices, something Yahoo needs.

Tumblr also bears a fair amount of unsavory content that may unsettle advertisers. Pornography represents a fraction of content on the site, but not a trivial amount for a site with 100 million blogs.

The search for profits isn’t unique to Tumblr, as free apps and services struggle to wring money from their users. Instagram famously generated no money when Facebook bought it.

Mr. Gillis of BGC said, “Either this management team is going to turn Yahoo around or be the ones who squandered its asset base.”

 

[djexpanium]

Tumblr has what Facebook is still lacking...GIFS and your own personal design. 

I don't think you can compare Myspace to Tumblr.

 

[tr1ll]

Sex sells and theres a WHOLE lot of *** on tumblr..

 

[royal assassin]

if yahoo can get her to be the tumblr spokesperson they'll go straight to the top

 

[sreggie101]

Tumblr has what Facebook is still lacking...GIFS and your own personal design. 

I don't think you can compare Myspace to Tumblr.

well as a business, i can't possibly see what tumblr can offer. so im not surprised it wasn't a profitable company. but then again, they are saying that about facebook, groupon...i can't see instagram being a profitable business buy itself. maybe twitter too.

the flipside is see this buy as marissa trying to make yahoo a direct competitor to google at least online. this goal still needs work, their search engine isn't even their own technology. as a company google > *. and that is just based off their R&D labs.

google's e blogger is why i think yahoo copped tumblr. its too early to throw the red flag on this deal, because you can't really tell how this is gonna end up. only time will tell. i personally have a lot of faith in marissa, and its not as if yahoo is at the top these days. i think they can only get better, at least under her leadership.

hell she is the only reason, yahoo has been in the news as of late, that company was a stagnant 90s relic before then.

 

[semf]

Yahoo buys GeoCities in Jan 1999 for $3.57 billion (in stock). Within 10 years, GeoCities shriveled up into obscurity.

Fox buys MySpace for $500 million in July 2005. Facebook explodes and becomes the new MySpace.

Yahoo buys Tumblr in May 2013 for $1.1 billion (in cash).

Facebook is slowly becoming stale and will also go way of the dodo.

 

[sreggie101]

Yahoo buys GeoCities in Jan 1999 for $3.57 billion (in stock). Within 10 years, GeoCities shriveled up into obscurity.

Fox buys MySpace for $500 million in July 2005. Facebook explodes and becomes the new MySpace.

Yahoo buys Tumblr in May 2013 for $1.1 billion (in cash).

Facebook is slowly becoming stale and will also go way of the dodo.

yo you just took it way back. totally forgot geocities..

 

[rell826]

Sex sells and theres a WHOLE lot of *** on tumblr..

Considering Yahoo's policy on adult oriented material, it gave people on Tumblr a lot to worry about when this news was announced. It took Yahoo years to finally get on board with adult ads.

via Reuters

IMAGE ISSUES

One question Yahoo may have to address is Tumblr's reputation as a home for pornographic blogs. At one point in 2009, about 80 percent of Tumblr's top sites had something to do with adult content. Today that number is closer to 5 percent, according to Quantcast data, but the image lingers.

Mayer said on the call that Yahoo's targeting tools would allow advertisers to zero in on specific demographics and content.

[h1]If Yahoo Buys Tumblr, What Will It Do With All That Porn?[/h1]
By Joshua Brustein on May 17, 2013

http://www.businessweek.com/article...uys-tumblr-what-will-it-do-with-all-that-porn

If Yahoo! succeeds in its attempt to acquire Tumblr, it will end up with one of the hottest Internet properties in today’s Web, with access to the coveted youth market and a foothold in mobile.

It will also wind up with a whole lot of porn.

Tumblr has many options for people interested in artsy photography or teenaged musings. Then there are Tumblrs with such names as We Want Porn, Above Average Porn, Defcon Porn, Porn Gif Haven, POV Porn, Porn and Weed, and When Tumblr porn goes wrong.

It will be fun to see how these are integrated into Yahoo News.

Tumblr’s terms of service are pretty clear: Sexual material is welcome. It just asks that such posts be tagged as NSFW, noting that its users include many people “from a variety of locations, cultures, and backgrounds with different points of view concerning adult-oriented content.” (And, presumably, some people who work in offices with open seating plans.) The one exception is that Tumblr does not want to host people’s pornographic videos. Even this seems to be more about bandwidth than morality.

“We’re not in the business of profiting from adult-oriented videos and hosting this stuff is … expensive,” the company explains.

Tumblr does have standards. It objects to bigotry, sexually suggestive content including minors, anything that promotes self-harm, or gore that is posted just to be shocking.

Tumblr’s actions reveal a slightly less permissive stance. Porn now makes up a smaller proportion of its traffic than it has in the past. Several years ago four of the top 10 subdomains on the site were pornographic, which many credited as a significant reason for the site’s growth. That’s not the case today, and Tumblr has shut down some of its more popular porn sites, citing violations of the company’s policies on spam. That this has been happening as Tumblr turns its focus from new users to new advertisers is probably not a coincidence.

Yahoo’s terms of service also warn users that they might encounter adult material in the company’s products, although it does so without using profanity. And like any service that includes user-generated content, Yahoo has had to deal with people indulging in sexual interests that not everyone would approve of.

But considering that Yahoo is ostensibly interested in Tumblr for the advertising, it’s hard to see the environment getting any friendlier for pornographers on the network. On the other hand, Yahoo may have to tread carefully with suggestive content. There are reasons why Tumblr is popular with young people. Prudishness is not high on that list.

 

[djexpanium]

Sex sells and theres a WHOLE lot of *** on tumblr..

Sex sells and theres a WHOLE lot of *** on tumblr..

Considering Yahoo's policy on adult oriented material, it gave people on Tumblr a lot to worry about when this news was announced. It took Yahoo years to finally get on board with adult ads.

via Reuters

IMAGE ISSUES

One question Yahoo may have to address is Tumblr's reputation as a home for pornographic blogs. At one point in 2009, about 80 percent of Tumblr's top sites had something to do with adult content. Today that number is closer to 5 percent, according to Quantcast data, but the image lingers.

Mayer said on the call that Yahoo's targeting tools would allow advertisers to zero in on specific demographics and content.

[h1]If Yahoo Buys Tumblr, What Will It Do With All That Porn?[/h1]
By Joshua Brustein on May 17, 2013

http://www.businessweek.com/article...uys-tumblr-what-will-it-do-with-all-that-porn

If Yahoo! succeeds in its attempt to acquire Tumblr, it will end up with one of the hottest Internet properties in today’s Web, with access to the coveted youth market and a foothold in mobile.

It will also wind up with a whole lot of porn.

Tumblr has many options for people interested in artsy photography or teenaged musings. Then there are Tumblrs with such names as We Want Porn, Above Average Porn, Defcon Porn, Porn Gif Haven, POV Porn, Porn and Weed, and When Tumblr porn goes wrong.

It will be fun to see how these are integrated into Yahoo News.

Tumblr’s terms of service are pretty clear: Sexual material is welcome. It just asks that such posts be tagged as NSFW, noting that its users include many people “from a variety of locations, cultures, and backgrounds with different points of view concerning adult-oriented content.” (And, presumably, some people who work in offices with open seating plans.) The one exception is that Tumblr does not want to host people’s pornographic videos. Even this seems to be more about bandwidth than morality.

“We’re not in the business of profiting from adult-oriented videos and hosting this stuff is … expensive,” the company explains.

Tumblr does have standards. It objects to bigotry, sexually suggestive content including minors, anything that promotes self-harm, or gore that is posted just to be shocking.

Tumblr’s actions reveal a slightly less permissive stance. Porn now makes up a smaller proportion of its traffic than it has in the past. Several years ago four of the top 10 subdomains on the site were pornographic, which many credited as a significant reason for the site’s growth. That’s not the case today, and Tumblr has shut down some of its more popular porn sites, citing violations of the company’s policies on spam. That this has been happening as Tumblr turns its focus from new users to new advertisers is probably not a coincidence.

Yahoo’s terms of service also warn users that they might encounter adult material in the company’s products, although it does so without using profanity. And like any service that includes user-generated content, Yahoo has had to deal with people indulging in sexual interests that not everyone would approve of.

But considering that Yahoo is ostensibly interested in Tumblr for the advertising, it’s hard to see the environment getting any friendlier for pornographers on the network. On the other hand, Yahoo may have to tread carefully with suggestive content. There are reasons why Tumblr is popular with young people. Prudishness is not high on that list.

Haaaa!!!!  I totally overlooked that

 

[shogun]

Not sure what happened to my comment. It disappeared. Like others have said, lots of crazy good inappropriate stuff on tumblr. If yahoo tries to clean it up there will be a lot of users leaving.

 

[futurehendrix]

Lots of good nude amateur females on there ... Wonder what will happen

 

[jj watt]

When a company says "we won't **** It up"

They usually do

 

[shogun]

^
Yeah it usually means they're going to change things up and hope it's not a complete failure.

 

[AEA18]

Does this mean that all the NSFW tumblrs will be shutdown?

 

[AEA18]

double

 

[rell826]

Lots of good nude amateur females on there ... Wonder what will happen

They'll get a job.

 

[medicalpartisan]

That is INSANE. 

 

[6 Rings G.O.A.T.]

That's a lot of paper!! Damn!!

 

[imstillmike]

everybody from their moms had tumblr so i know the value of the site was top notch

 

[suberzat1]

man if i would have put money into tumblr back when i first found out about it

 

[waitwut]

the thing is tumblr is slowly falling off

yahoo done goofed for buying it

 

[coldcity]

Does this mean that all the NSFW tumblrs will be shutdown?

dont they techinally HAVE to now?