Will Yahoo come Tumblr-ing down?

Profile picture for user slauchlan By Stuart Lauchlan May 19, 2013
Summary:
Silicon Valley's worst kept secret ever will be confirmed later today when Yahoo announces a buyout of Tumblr. But is this just a PR gesture towards the achingly cool or a thought-through business play by Marissa Mayer?

marissa-mayer-thmb
It's been said that Marissa Mayer's biggest challenge is going to be making Yahoo cool again.

If we accept that view - even with tongue firmly placed in cynical cheek - is her decision to buy Tumblr in line with that objective?

Is the new Yahoo CEO's first notable move - other than that embarrassing kerfuffle over remote working and CEO creche facilities - a winner?

At the time of writing the deal has not been formally announced and won't be until 2pm Pacific Time, but is already classed as the single worst kept secret in Silicon Valley.

Later today Yahoo will confirm it's splashing out $1.1 billion in cash for Tumblr, a blogging site that raked in a mighty (ahem) $13 million in revenues last year.

The acquisition is intended to beef up Yahoo's social networking cred, although received wisdom on Wall Street argues that the firm will be kept at arms length as a separate entity, probably under the management of its 26 year old - and soon to be very rich - founder David Karp.

Tumblr, which has about 100 million users and hosts 108 million blogs upon which users have so far submitted at least 50.9 million posts, has been wooed by other potential suitors but rebuffed their attentions in the past.

In a 2012 interview with the Guardian, Karp said:

Particularly in the first three years, there were a lot of (mergers and acquisitions) people who would pull you aside and you'd think "Well, s***, I could be a pretty rich 23-year-old with very little effort. We stuck it out. I won't say I really knew why.'

Why now then?

So what's in it for both parties now?

The cynical view from the back seats is that it's a pitch for coolness by Yahoo. Richard Holway of Techmarketview hits the nail on the head when he says:

Marissa Mayer, Yahoo’s ‘don’t dare work at home’ new CEO, believes that Yahoo’s main problem is its ageing client base (ie me) and that it isn’t considered as ‘cool’. Tumblr is currently the essence of ‘cool’. But, as we all know the fastest way of making any company uncool is to get it bought by an old company trying to become cool. (Why is it that however good my ‘moves’ are, my grandchildren always start laughing uncontrollably when I start dancing?)

So there has to be more to it than just the cool factor.

For Karp, it's probably the realisation that he's done all he can do without help from a bigger company with access to funds.

For Yahoo, it is undoubtedly a chance to associate with something achingly young - one survey (see below)  found Tumblr was more popular than Facebook among people aged 13 to 25.  Lots and lots of Beliebers then.

c5aaa4701ce54a7fdddc45c99ac9cf27

According to metrics from Quantcast Measure, Tumblr had 184 million unique visitors, and 12.1 billion page views last month which is good news for Yahoo.

Tumblr's also got pretty good credentials when it comes to mobile content delivery.

Karp himself is a good asset to acquire and it seems from Silicon Valley scuttlebutt that he's tied in for four years at least as part of the deal.

Leaving him on a loose string is a good idea. Tumblr's young demographic will resist attempts from 'Yahoo Corporate' to sanitise and patrol content on the site - it's remarkably popular with pornstars - so best to keep safe distance there.

Can Yahoo get it right?

All eyes will be on Mayer's handling of the new acquisition though. Yahoo's track record of mis-managing the post-purchase process isn't impressive, going back as far as Geocities.

Mayer's brief is in large part to reboot the share of the online advertising market which has been eaten away by Facebook and Google. In the first quarter of 2013 Yahoo’s revenue shrank 11%, to $1.1 billion. To that end she's been looking for some more social media skin in the game.

She tried to get Dailymotion, but was rebuffed by a major Non! from the French government which was none too keen on a US interloper snapping up one of its digital success stories. She was then supposedly after Hulu. But in the event it turns out that it's to be Tumblr that's first in line.

Adult challenges

There are two main challenges to using Tumblr as a digital advertising platform. The first is the 'adult' nature of some of the content which may be too much for some of the more conservative advertisers, especially in the US.

This is after all a nation in which lobby groups, such as the (unable to count properly) One Million Moms, have a fit of the vapours at the very mention of words such as 'sex' and calls for boycotts on firms daring to advertise against TV shows they don't approve of.

That said, Alan Weiner of Gartner notes:

Tumblr makes sense as a content management-meets-curation platform. Such a move would allow consumers, brands and marketers (i.e. content marketing) to curate Yahoo’s syndicated content (original and licensed) and use those pictures, videos and stories to create personal and professional Tumblr pages.

Coke and Campbell’s are just two of countless brands that have created Tumblr sites to showcase their wares and tell their stories to consumers. The content platform plan allows Yahoo a few revenue paths including a freemium service option and a venue for targeted advertising.

The second is the user base itself. Self-identifying anarchic, anti-establishment individuals are likely to react badly to the sudden appearance of corporate advertising on their turf. As noted above, letting Karp keep on keeping on with the current Tumblr style is going to be critical to the transition.

In the end I find myself in agreement with Gartner's Weiner when he argues:

Mayer’s biggest challenge—something Yahoo has not shown to be a strength—is to integrate Tumblr into Yahoo’s product set and get the cash register ringing again. Certainly one cannot overlook the power of Yahoo attempting to make itself cool and relevant again, but this must be more than a very expensive PR move.

We'll doubtless update this posting once we've heard from Mayer and Co later today.