Yahoo has acquired Tumblr, the popular blogging service, for $1.1 billion cash in one of the largest deals for a social networking company in years, even surpassing Facebook’s $1 billion acquisition for Instagram.
Yahoo gets the six year old social blogging platform’s access to a younger audience, as Tumblr is most popular among the 18 to 24 age bracket. Tumblr’s reach is impressive, hosting 105 million blogs with 900 new posts posted every second. The service has 300 million monthly unique visitors and 120,000 signups each day.
What Tumblr does not have is an easy way to make money. Despite its goal this year to earn $100 million, it managed just $13 million in revenue for the first quarter, and $13 million for all of 2012. The company had been turned down by Facebook, Microsoft and Google for a possible acquisition, and the company burned through $25 million in 2012. Tumblr was finding it very difficult to make its investors a return on its $125 million in venture capital.
Which is probably why Forbes’ Peter Cohan called the deal “Yahoo shareholders’ most expensive tuition payment yet.” He said the acquisition failed because Tumblr’s monetary ambitions were unattractive, both companies were worse as a result of the deal, the deal was overpriced, and Yahoo would struggle to successfully integrate the social blogging site.
Yahoo’s CEO Marissa Mayer tried to calm investors as well as Tumblr users over the deal, promising in a newly opened Tumblr account “not to screw it up. Tumblr is incredibly special and has a great thing going. We will operate Tumblr independently. …Yahoo! will help Tumblr get even better, faster.”
What attracted Yahoo to Tumblr was its popularity and networking potential, Mayer explained. The two companies will develop advertising platforms.
“Tumblr’s tremendous popularity and engagement among creators, curators and audiences of all ages brings a significant new community of users to the Yahoo! Network,” Mayer said in the blog. “The combination of Tumblr+Yahoo! could grow Yahoo!’s audience by 50 percent to more than a billion monthly visitors, and could grow traffic by approximately 20 percent.”
Tumblr CEO David Karp also allayed user’s concerns, reiterating “how awesome this is,” in a blog post.
“We’re not turning purple. Our headquarters isn’t moving. Our team isn’t changing. Our roadmap isn’t changing. And our mission – to empower creators to make their best work and get it in front of the audience they deserve – certainly isn’t changing,” Karp said. “So what’s new? Simply, Tumblr gets better faster. The work ahead of us remains the same – and we still have a long way to go! – but with more resources to draw from.”
Whether Tumblr users stay on board remains to be seen. WordPress gained more than 72,000 imported posts from Tumblr in one hour on Sunday when the acquisition was announced, according to WordPress CEO Matt Mullenwag. An average hour sees 400 to 600 Tumblr imports.
Boosted by $4.3 billion in cash from selling half of Yahoo’s stake in the Chinese Internet titan Alibaba, Yahoo has been on an acquisition spree (LINK TO “Yahoo Acquisition Spree Acquires MileWise, GoPollGo” SHARED ON GOOGLE DOCS) lately at its boosts its product offering, having recently bought MileWise, GoPollGo, Summly, and Astrid.
Yahoo will have to find viable ways of monetizing the blogging service to keep this pricey deal from falling into the same failed acquisition bin as its $35 million purchase for Flickr or its $3.6 billion deal for GeoCities, both of which have been shut down or ignored overall by Yahoo, the New York Times points out.