News / Economy

Yahoo Buying Tumblr for $1.1 Billion

 A news headline about the Tumblr sale to Yahoo scrolls on a building in New York's Times Square, May 20, 2013. A news headline about the Tumblr sale to Yahoo scrolls on a building in New York's Times Square, May 20, 2013.
x
 A news headline about the Tumblr sale to Yahoo scrolls on a building in New York's Times Square, May 20, 2013.
A news headline about the Tumblr sale to Yahoo scrolls on a building in New York's Times Square, May 20, 2013.
Reuters
Yahoo Inc said it is buying blogging service Tumblr for $1.1 billion cash, giving the struggling Internet pioneer a much-needed platform in social media to reach a younger generation of users.

The deal, announced Monday, is a bold bet by Yahoo Chief Executive Marissa Mayer to revitalize the company by co-opting a Web property with strong visitor traffic, but little revenue.

Yahoo made clear it was sensitive to concerns that it might damage Tumblr by making it less irreverent or more corporate.

“Per the agreement and our promise not to screw it up, Tumblr will be independently operated as a separate business,” Yahoo said in a statement.

The acquisition, which will use up about a fifth of Yahoo's $5.4 billion in cash and marketable securities, is the largest by far since Mayer took the reins in July with the goal of reversing a long decline in Yahoo's business and Web traffic.

Analysts said Yahoo appeared to be overpaying for a business that might not contribute to revenue for years, but said that Yahoo had to do something to plug a hole in its social media efforts.

RBC Capital Markets analyst Mark Mahaney called it a “long-shot/long-term investment” but one that fits into Mayer's turnaround strategy.

“[Yahoo's] fundamentals have been subpar for numerous years, in part because of the company's missing presence in Social and Mobile. Tumblr may help [Yahoo] develop that presence,” Mahaney said in a note.

Tumblr is one of the Web's most popular hubs of so-called user-generated content, drawing young people who use the platform to post pictures and text. Tumblr has more than 100 million blogs in its network, ranging from “White Men Wearing Google Glass” to housing-focused “The Worst Room.”

Though Yahoo remains one of the Web's most popular destinations, it has seen its revenue shrink in recent years as consumers and advertisers favor rivals such as Google and Facebook. The deal is expected to increase Yahoo's audience by 50 percent.

Rich premium

While Tumblr is certainly popular - it has tens of millions of monthly unique visitors - analysts questioned what kind of contribution it will make to Yahoo revenue, since advertising on the site is in its nascent stages.

Media reports have pegged Tumblr's 2012 revenue at $13 million. The privately held company, based in Manhattan, does not disclose its financial results.

Yahoo expects that Tumblr will help boost revenue by 2014, Ken Goldman, Yahoo's chief financial officer, said on a call with analysts. He did not provide specific numbers.

“Even if revenue was $100 million, it means Yahoo paid 10 times revenue,” said BGC Financial analyst Colin Gillis. “Ten times is what you pay to date the belle of the ball. It's on the outer bands of M&A.”

Yahoo could quickly boost Tumblr's revenue by combining the website with its own sales force, said Pivotal Research Group analyst Brian Wieser. Loading Tumblr up with banner ads risks alienating its users, however, and probably wouldn't provide a significant lift to Yahoo's overall revenue, he said.

“It's not clear that this deal will be favorable from a return-on-capital perspective,” Wieser said. “One billion [dollars] for one company is a big bet.”

Gillis and Wieser were contacted on Sunday after the deal was reported by the online publication All Things D.

Mayer, on the conference call, described the Tumblr deal as an exception and said Yahoo was not necessarily planning lots of similarly sized deals.

Yahoo is one of several companies that have coughed up considerable money for buzz-worthy start-ups that hold promise. Facebook bought the popular social media photo site Instagram for $1 billion last year. In 2006, Google paid $1.6 billion for YouTube.

Shares of Yahoo rose as much as 2 percent in early trading Monday, but later fell back. They were up 18 cents to $26.70 in late-morning dealings. Through Friday's close, the shares had risen 70 percent since Mayer became CEO.

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.

One area where Yahoo plans to ramp up advertising: Tumblr's dashboard, the main landing point, akin to a newsfeed.

Dealing with that and other issues may fall to David Karp, 26, who founded Tumblr in 2007 and will remain CEO.

Karp, a self-taught programmer who left high school in favor of home schooling, did not take part in Mayer's conference call. Media reports have suggested his take in the billion-dollar sale would top $200 million.

In a 2012 interview with The Guardian, Karp seemed to be less interested in money than in Tumblr's prominence.

“There are a lot of rich people in the world. There are very few people who have the privilege of getting to invent things that billions of people use,” he said.

You May Like

Multimedia US Nurse ‘Cured of Ebola,’ NIH Says

Nina Pham, Texas nurse who treated first Ebola patient in US, received no experimental drugs; WHO expects vaccine surge in 2015 More

Video Islamic State Militants Encroach on Baghdad

Iraqi capital not under ‘imminent threat,’ US military says, amid worries about foothold More

Video Hong Kong Protesters Focus on Holding Volatile Mong Kok

Activists say holding Mong Kok is key to their movement's success, despite confrontations with angry residents and police More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
After Decades of Pressure, Luxembourg Drops Bank Secrecy Rulesi
X
October 21, 2014 12:20 AM
European Union finance ministers have reached a breakthrough agreement that will make it more difficult for tax cheats to hide their money. The new legislation, which had been blocked for years by countries with a reputation as tax havens, was approved last week after Luxembourg and Austria agreed to lift their vetoes. But as Mil Arcega reports, it doesn’t mean tax cheats have run out of places to keep their money hidden.
Video

Video After Decades of Pressure, Luxembourg Drops Bank Secrecy Rules

European Union finance ministers have reached a breakthrough agreement that will make it more difficult for tax cheats to hide their money. The new legislation, which had been blocked for years by countries with a reputation as tax havens, was approved last week after Luxembourg and Austria agreed to lift their vetoes. But as Mil Arcega reports, it doesn’t mean tax cheats have run out of places to keep their money hidden.
Video

Video Kobani Refugees Welcome, Turkey Criticizes, US Airdrop

Residents of Kobani in northern Syria have welcomed the airdrop of weapons, ammunition and medicine to Kurdish militia who are resisting the seizure of their city by Islamic State militants. The Turkish government, however, has criticized the operation. VOA’s Scott Bobb reports from southeastern Turkey, across the border from Kobani.
Video

Video China Political Meeting Seeks to Improve Rule of Law

China’s communist leaders will host a top level political meeting this week, called the Fourth Plenum, and for the first time in the party’s history, rule of law will be a key item on the agenda. Analysts and Chinese media reports say the meetings could see the approval of long-awaited measures aimed at giving courts more independence and include steps to enhance an already aggressive and high-reaching anti-corruption drive. VOA’s Bill Ide has more from Beijing.
Video

Video US ‘Death Cafes’ Put Focus on the Finale

In contemporary America, death usually is a topic to be avoided. But the growing “death café” movement encourages people to discuss their fears and desires about their final moments. VOA’s Jerome Socolovsky reports.
Video

Video Ebola Orphanage Opens in Sierra Leone

Sierra Leone's first Ebola orphanage has opened in the Kailahun district. Hundreds of children orphaned since the beginning of the Ebola outbreak face stigma and rejection with nobody to care for them. Adam Bailes reports for VOA about a new interim care center that's aimed at helping the growing number of children affected by Ebola.
Video

Video Young Nairobi Tech Innovator on 'Track' in Security Business

A 24-year-old technology innovator in Nairobi has invented a tracking device that monitors and secures cars. He has also come up with what he claims is the most robust audio-visual surveillance system yet. As Lenny Ruvaga reports from the Kenyan capital, his innovations are offering alternative security solutions.
Video

Video Latinas Converting to Islam for Identity, Structure

Latinos are one of the fastest growing groups in the Muslim religion. According to the Pew Research Center, about 6 percent of American Muslims are Latino. And a little more than half of new converts are female. VOA’s Carolyn Presutti travelled to Miami, Florida -- where two out of every three residents is Hispanic -- to learn more.
Video

Video Exclusive: American Joins Kurds' Anti-IS Fight

The United States and other Western nations have expressed alarm about their citizens joining Islamic State forces in Syria and Iraq. In a rare counterpoint to the phenomenon, an American has taken up arms with the militants' Syrian Kurdish opponents. Elizabeth Arrott has more in this exclusive profile by VOA Kurdish reporter Zana Omer in Ras al Ayn, Syria.
Video

Video South Korea Confronts Violence Within Military Ranks

Every able-bodied South Korean male between 18 and 35 must serve for 21 to 36 months in the country’s armed forces, depending upon the specific branch. For many, service is a rite of passage to manhood. But there are growing concerns that bullying and violence come along with the tradition. Reporter Jason Strother has more from Seoul.
Video

Video North Carolina Emerges as Key Election Battleground

U.S. congressional midterm elections will be held on November 4th and most political analysts give Republicans an excellent chance to win a majority in the U.S. Senate, which Democrats now control. So what are the issues driving voters in this congressional election year? VOA National Correspondent Jim Malone traveled to North Carolina, one of the most politically competitive states in the country, to find out.
Video

Video Comanche People Maintain Pride in Their Heritage

The Comanche (Indian nation) once were called the “Lords of the Plains,” with an empire that included half the land area of current day Texas, large parts of Oklahoma, New Mexico, Kansas and Colorado.The fierceness and battle prowess of these warriors on horseback delayed the settlement of most of West Texas for four decades. VOA’s Greg Flakus reports from Lawton, Oklahoma, that while their warrior days are over, the 15,000 members of the Comanche Nation remain a proud people.
Video

Video Turkey Campus Attacks Raise Islamic Radicalization Fears

Concerns are growing in Turkey of Islamic radicalization at some universities, after clashes between supporters of the jihadist group Islamic State (IS) or ISIS, and those opposed to the extremists. Pro-jihadist literature is on sale openly on the streets of Istanbul. Critics accuse the government of turning a blind eye to radicalism at home, while Kurds accuse the president of supporting IS - a charge strongly denied. Henry Ridgwell reports from London.

All About America

AppleAndroid

World Currencies

EUR
USD
0.7893
JPY
USD
107.68
GBP
USD
0.6238
CAD
USD
1.1214
INR
USD
61.185

Rates may not be current.