Yahoo Board to Meet Sunday to Consider $1.1B, All-Cash Deal for Tumblr

http://allthingsd.com/20130517/yahoo-board-to-meet-sunday-to-consider-1-1-billion-all-cash-deal-to-acquire-tumblr/

by ssclafani • 13 years ago

117 110 13 years ago

robryan• 13 years ago

If this does happen it will be very interesting to see Tumblr's progress over the next year. Will give insight into whether Yahoo has turned the corner or whether it is the same Yahoo we have seen in the past 5 years.

sdoowpilihp3• 13 years ago

Agressive acquisitions such as this one are already signaling change at the company. The real question is whether that change is meaningful in terms of acquiring users and maximizing profits.

AtTheLast2• 13 years ago

Yahoo seems to be making a lot of the right moves in terms of product design and development talent. I think they have a good chance of being able to help monitize Tumblr in a way that doesn't ruin the user experience. Like you said, this will be a true test for the new Yahoo.

ghshephard8• 13 years ago

Well, looking forward to the next Accidental Tech Podcast - should be very interesting to get Marco Arment's perspective on this. First Instapaper, now Tumblr.

I wonder which will be a bigger deal for Marco...

[Edit - I also wonder whether he had an inkling that these conversations were taking place. He has been discussing his tumblr roots a bit more than usual recently, including his undocumented podcast easteregg that he built into tumblr, and the fact that the tumblr source code was open source, but not public, which allowed Marco to use it for future endeavors...

Edit 2: And this little hint from his Blog on May 11th.

"I ended up joining Davidville instead, for less money, because David would let me work on a brand new Mac with any keyboard I wanted and more than three feet of desk space. A few months later, we started Tumblr. Turned out to be the right move. "

]

hkmurakami12• 13 years ago

bigger personal/professional deal - instapaper (full ownership and design of product, years w. the product, etc.)

bigger monetary deal - tumblr hands down

aaronbrethorst3• 13 years ago

Please note, I have zero inside information on this.

Wikipedia attributes cofounder status to Marco[1]. Let's assume that he got a raw deal from Karp and had a potential 30% stake in the business. He worked on it for 3 years and 7 months. Let's just assume he fully vested (not quite accurate, but the math is easier). Over the course of five rounds of funding, maybe the final ownership stake of the founders was diluted from 100% to 10%[2]. Marco owns 3% of the company, and walks away with a hair over $30 million pre-tax.

[1] http://en.wikipedia.org/wiki/Marco_Arment

[2] Handy infographic: http://www.bothsidesofthetable.com/2011/10/14/understanding-...

hkmurakami12• 13 years ago

even if he were a "first hire" and only had 1/10 that equity hell still get $3mm pretax; nothing to laugh at.

ghshephard8• 13 years ago

David Karp has 25% of Tumblr [1], and makes it clear, that to start off with - it really was just David and Marco.

"...Marco Arment, Karp’s first and, for a long time, only employee at Tumblr."

http://www.forbes.com/sites/jeffbercovici/2013/01/02/tumblr-...

sdoowpilihp3• 13 years ago

Yahoo needs a company like this to address two major issues. First, they lack a social offering. Second, they need to draw in more users, and I imagine Yahoo is hoping to bring over a large user base to their other products via integration with their ecosystem. If Yahoo does acquire tumbler, it will be interesting to see how they choose to integrate it (if they do at all).

hkmurakami12• 13 years ago

not only is the integration interesting, is by far the most challenging and critical thing they have to do with tumblr. in fact, they can't afford to mess this up. iirc there are already new blogging startups that are trying to unseat tumble as the social blogging king.

nosrac• 13 years ago

Big-time integration would be a huge mistake.

Look at how big of a lead on photography Flickr when Yahoo purchased them. After the purchased they were told to focus on integration.

Flickr is a shadow of its former self

eterm• 13 years ago

For the first time in 6 or 7 years I didn't renew my Flickr sub this year.

It's not just that I've grown older, it's that fundamentally Flickr no longer delivers the content and community, and blame for that must lie at Yahoo's door and their failure to innovate with photo.

aswanson2• 13 years ago

Bingo. That 'integration' impulse by big companies is the death-knell for a product. Better off to leave a successful product alone.

Pxtl2• 13 years ago

Integration wasn't the problem. It was the stagnant development in every other front that ruined Flickr.

citricsquid• 13 years ago

If the deal goes through Yahoo would now own the Tumblr audience, so Yahoo would have a product with a young audience, the audience Marissa Mayer wants for Yahoo, however, how would they move that audience over to other Yahoo products?

An acquisition of Tumblr seems very much like the acquisition of reddit by Advance Publications. They both have huge audiences that are passionate and growing fast but have great difficulty monetising their audiences effectively and are providing no real value to the parent company (other than the potential for the sites to become profitable). If Yahoo bought Tumblr how would they ever convert the audience into Yahoo users?

I guess it comes down to: what value is there to any company in "owning" an audience if that audience has no interest in becoming the audience of the parent and will actively resist it? People would get very angry if AP started pushing their ownership of reddit onto reddit users, having Wired articles automatically frontpaged, things like that would drive everyone away, how will Yahoo avoid that?

sdoowpilihp3• 13 years ago

Bringing the audience over would certainly be a Herculean effort of integrating existing services. As an example Google plus has been integrated into nearly every facet of googles offerings. Yahoo will need to do the same with tumblr, and all of their products, in order to compete. People expect their experience across a companies various products to be seamless now days.

hkmurakami12• 13 years ago

a lot of people have commented that integrating g+ into reader could have worked quite nicely. maybe there's a way to integrate yahoo services with tumble in that kind of symbiotic, natural way without disrupting this existing feel and workflow/user-experience of tumblr.

jerf• 13 years ago

"how would they move that audience over to other Yahoo products?"

The way the article is phrased (though we must remember it's third-hand at best) leads me to believe the strategy may be to go the other direction, to meld core Yahoo strengths (whatever that may be) into Tumblr. That is, integrate Yahoo offerings into Tumblr rather than the other way around.

hkmurakami12• 13 years ago

how to do this without wrecking the tumble user experience is a huge challenge. One of the great things about tumblr timelines is information purity (and great curation by its users).

iirc yahoo's strongest services are sports, news, finance, and mail. these would all seem to disrupt the feel and information purity of tumble if done carelessly.

maybe encouraging sharing/linking and extrapolating on yahoo assets by means of great tumble integration into yahoo services and vice versa could benefit both yahoo and tumblr users?

seldo• 13 years ago

Tumblr is ad inventory for Yahoo. Specifically, mobile ad inventory -- most of Tumblr's revenue comes from mobile ads. Mobile is a huge area of growth that Yahoo is anxious to stay on top of. They don't need Tumblr's audience to go anywhere other than Tumblr, and if they're smart they won't even try.

sliverstorm• 13 years ago

This is exactly the idea that popped into my head the instant I read the title. If executed well, it would make everybody happy. It would be a great business move.

Just got to hope they can do a good job of it. I have no particular attachment to Yahoo!, but the sentimental side of me would like to see some old giants make worthy comebacks.

hkmurakami12• 13 years ago

you've just described Facebook for me (relative to the services fb wants me to use)

mbell• 13 years ago

I think the (possible) acquisition means a lot more for Yahoo's ability to attract talent than it does for the business bottom line. Probably the same thing, but only in the longer term.

If they acquire tumblr and shut it down, or make changes that result in a receding of the user base, then they are unlikely to acquire talent. If they acquire tumblr and improve it, they will improve they position in the talent acquisition market.

hkmurakami12• 13 years ago

even better would be to keep tumblr a separate entity like slideshare and LinkedIn and really sell that fact to recruits. slide share stresses their small company dynamic +big company resources, and I think that's an attractive proposition for many.

jcampbell13• 13 years ago

I think it would be smart for Yahoo to do things to attract talent, but Tumblr is probably the wrong company. Tumblr is adored by people with zero tech talent and is based in New York* . That being said, your comment has made me conflicted. MM has made a ton of insane acquisitions, but the net result is that I would actually now consider Yahoo as an employer. I suppose a series of decisions that I find stupid leading to a positive impression of Yahoo is simply cognitive dissonance that I must live with.

* I live in New York, thus don't mean this as slight.

oakaz• 13 years ago

You knew Yahoo owns Flickr, right?

Flickr has much more power than Tumblr. And they just maintain it for 6 years with same design with ugly looking arrows that used to look nice like 10 years ago.

I don't think Yahoo has a good vibe. They just buy and kill. Flickr is the only one that could survive, which can't be considered as success.

dm8• 13 years ago

Tumblr is a media company at the core. So it should work out well for Yahoo.

hkmurakami12• 13 years ago

I just hope they don't do crap like interspersing yahoo news or yahoo sports stuff into timelines following those kinds of themes.

please don't make the product suck by jamming yahoo products that don't match the tumble user ecotone.

aswanson2• 13 years ago

What exactly does that statement mean?

OGC• 13 years ago

Nothing

> Tumblr is a media company at the core.

Tumblr is a glorified blog hoster.

Apocryphon• 13 years ago

If this goes through, it may be amusing to see Yahoo doing better in the social space than Google (is with G+). Tumblr seems like a very wild, organic community that is its own social network. If Yahoo treats it the way Conde Nast has with reddit, it could turn out to be quite the boon for them.

stanleydrew• 13 years ago

Do you think Conde Nast believes reddit has been a boon for them?

staunch2• 13 years ago

Of course. They could sell it tomorrow for a nice multiple. They bought it for like $15 million and could easily sell it for $100+ million.

hkmurakami12• 13 years ago

it's becoming a force of its own, influencing other sites to follow it and setting trends and attitudes. 2chan is a massive social force in Japan. and reedit is following in its doorsteps and on a path of bigger things.

PedroBatista• 13 years ago

Too much soap opera style info for someone who is "considering" an $1.1B deal.

It seems a bit odd, and everybody knows how these Hollywood style "romances" tend to end..

minikomi• 13 years ago

With tumblr as a curation hub and Flickr as a pool of images, maybe yahoo will next aquire a video pool (Vimeo?), a sound / music pool (soundcloud?) ... Having a small network of creative sites each with their own communities, tied by a single hub would be pretty cool.

Pxtl2• 13 years ago

Except that Flickr shows how poorly Yahoo will manage this acquisition. I feel sorry for all those Tumblr lovers that will see their favoured product ground down by mismanagement and neglect.

AtTheLast2• 13 years ago

In the past Yahoo has butchered their acquisitions. However, Marissa Mayer is a product focused CEO. I see her doing a good job of not messing up the Tumblr experience if Yahoo acquires it.

duaneb• 13 years ago

Yahoo is under different management now; I think if Yahoo has ever had a chance to change, it's now.

skinnymuch• 13 years ago

Completely minor point but Iac has owned Vimeo for so long, I doubt they'd want to ever sell it to a company like Yahoo.

onedev3• 13 years ago

I agree with you, I think Yahoo gets it. They have a vision, and they're actively rebuilding their tech portfolio.

Flickr and Tumblr are great assets to have.

Whether it turns out great for them or not though, we have yet to see. It's certainly interesting to watch though.

jordanthoms• 13 years ago

The next Flickr? Hopefully they can keep innovating after an acquisition...

hcarvalhoalves5• 13 years ago

Isn't something really weird going on in the world when you can sell a company with almost no revenue (let alone profit) and no obvious business model in the horizon for $ 1.1B, or is it just me?

jessedhillon2• 13 years ago

If acquiring millions of users is so worthless, why don't we all have 100k+ monthly page views and fantastic engagement numbers?

Or, put another way: put a dollar value on a speculative Yahoo effort to attract a user base the size and demographic composition of tumblr's. Don't forget to price in the risk of failure.

hcarvalhoalves5• 13 years ago

The point is, since when eyeballs started being worth so much? Isn't it proven already that users are like butterflies in the hand (you can't squeeze them, but let loose they fly away)? Myspace is there to prove that being king today doesn't say s* about your position in ten years. This year Facebook lost 1.4 million users, first deficit since launch.

coldtea4• 13 years ago

>If acquiring millions of users is so worthless, why don't we all have 100k+ monthly page views and fantastic engagement numbers?

What kind of bizarro logic is this?

For one, something being worthless doesn't mean it is also common. There are rare and difficult to attain things that are also worthless.

Second, we're discussing monetary worth here. That is, if you get something back for your 1.1 billion dollars.

A service giving you free money would also have 100k+ monthly page views and fantastic engagement numbers. But it would be worse than worthless.

markdown2• 13 years ago

You are buying the potential for profit.

Not exactly the same thing, but in a way it's similar to buying a broadcast license. Companies pay millions/billions for the right to project some media onto eyeballs.

adventured2• 13 years ago

Except a broadcast license is protected and inherently limited by the govt. Tumblr's position in the world is neither (ask all the tumblrs that have come before). It's really nothing like buying a broadcast license.

hcarvalhoalves5• 13 years ago

I believe the better analogy would be buying a broadcaster, not a license. A license is just the government milking the private sector over a historical real world limitation (broadcasting frequencies).

coldtea4• 13 years ago

>You are buying the potential for profit.

So, let me rephrase the question:

Isn't something really weird going on in the world when you can sell a company with almost no revenue (let alone profit) and no obvious business model in the horizon for $ 1.1B,

AND

no bloody potential for that kind of profit either, similar to endless other deals that got nowhere for the buyer, or is it just me?

Cryode• 13 years ago

I'm with you - the perceived values of websites/businesses like this are astounding. Somehow founders and VCs walk away with a bunch of money after acquisitions, but what's Yahoo going to do? Seems like a large sum for an acqui-hire.

Then again I'm a giant noob when it comes to startups, funding and acquisitions. Regardless, the numbers are out of this world.

ghshephard8• 13 years ago

Absolutely NOT an acqui-hire. $13mm in 2012 revenue, more than doubling in 2013... "In November it shouldered its way into the top ten online destinations, edging out Microsoft’s Bing and drawing nearly 170 million visitors to its galaxy of user-created pages, according to the measurement firm Quantcast. Tumblr’s tens of millions of registered users create 120,000 new blogs every day, for a total of 86 million and counting, which drive some 18 billion page views per month."

http://www.forbes.com/sites/jeffbercovici/2013/01/02/tumblr-...

ghshephard8• 13 years ago

The Forbes Article has them hockey sticking their revenue.

http://www.forbes.com/sites/jeffbercovici/2013/01/02/tumblr-...

"The company finished 2012 with $13 million in revenue; the hope in this “leap” year is that it’ll get to $100 million."

nerdnorth• 13 years ago

That article is full of gold:

2012 - Operating Expenses: $25 million, Revenue $14 million (that's an $11 million loss on paper)

For 2013, they're saying they'll need to hit 4x revenue growth in order to hit profitability?

Does that mean 4x the ads for their (fickle) userbase?

majani• 13 years ago

There is value in buying into a network of users, but it is in no way worth 100X multiples of sales. Since such deals usually happen within the Silicon Valley ecosystem, I strongly suspect that cronyism is involved. VCs in Yahoo decide to do the VCs in Tumblr a solid, and the favour probably returned in the future. This is what investors really mean when they tell companies that they have 'connections.' The VC business is tough, with average returns dwindling each year since the bubble, so there is motivation for this sort of thing to happen.

jasonlingx• 13 years ago

Oh no... time to move off tumblr...

adventured2• 13 years ago

Yahoo really needed a product to fill in that Geocities gap.

phowat• 13 years ago

Curiously, they had this tumblr clone called Yahoo! Meme ( http://en.wikipedia.org/wiki/Yahoo!_Meme ). Which, IIRC, was developed by Yahoo Brazil and I guess marketed mostly in the south american market. I guess it didn't get anywhere since they killed it in May 2012.

nwh2• 13 years ago

Even Archive Team won't be able to save Tumblr.

kmfrk4• 13 years ago

I think a lot of people would be interested in supporting a Kickstarter of some sort, though.

nwh2• 13 years ago

I've personally archived a few blogs, and the amount of data on tumblr is just incredible. Just a single one was almost 2.5GB. There's probably millions of blogs on tumblr.

hkmurakami12• 13 years ago

I wonder why they're deciding to offer an All-Cash offer rather than some part of the offer being in Stock. Yahoo's stock has done well lately and should be fairly attractive to Tumblr investors and management. Given the size of the potential acquisition, there aren't that many alternative suitors, so Yahoo should have pretty good leverage here, especially since Tumblr has gotten heat over the last few years regarding their lack of a business model.

Maybe Yahoo is afraid that offering say ~$400MM in stock would dilute the existing shares and irritate existing shareholders?

joshu• 13 years ago

you don't want to suddenly create a huge stockholder.

UVB-76• 13 years ago

Isn't Tumblr an IP nightmare, and wouldn't Yahoo taking ownership make it a giant target for litigation?

NelsonMinar• 13 years ago

Why did someone leak this much information about a secret deal? Kara Swisher is an awesome reporter and the go-to for this kind of article, but whoever talked had a reason for doing so. One plausible guess; someone on Tumblr's board is trying to cement a second offer from another company. This article now names a price and a deadline.

Yahoo Board to Meet Sunday to Consider $1.1B, All-Cash Deal for Tumblr

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