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

Video In Ukraine's Nikishino, No House Untouched by Fighting

Ninety percent of homes in one small village were damaged or destroyed as government forces failed to stop a rebel advance More

Pakistan’s 'Last Self-Declared Jew' Attacked, Detained

Argument about the rights of non-Muslims in Pakistan allegedly results in mob beating well-known Jewish Pakistani More

Turkey Cracks Down on Political Dissent, Again

People daring to engage in political dissent ahead of upcoming general elections could find themselves in jail 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.
In Their Own Words: Citizens of Kobanii
X
Mahmoud Bali
March 06, 2015 8:43 PM
Civilians are slowly returning to Kobani, after Kurdish fighters backed by coalition airstrikes fought off a four-month siege of the northern Syrian town by Islamic State militants. VOA Kurdish Service reporter Mahmoud Bali talked to some of those who have returned. We hear about the devastation of Kobani through their own words.
Video

Video In Their Own Words: Citizens of Kobani

Civilians are slowly returning to Kobani, after Kurdish fighters backed by coalition airstrikes fought off a four-month siege of the northern Syrian town by Islamic State militants. VOA Kurdish Service reporter Mahmoud Bali talked to some of those who have returned. We hear about the devastation of Kobani through their own words.
Video

Video In Ukraine's Nikishino, No House Untouched by Fighting

In the village of Nikishino, in eastern Ukraine, recent fighting has brought utter devastation. Ninety percent of the houses are damaged or destroyed after government forces tried and failed to stop rebels advancing on the strategically important town of Debaltseve nearby. Patrick Wells reports for VOA from Nikishino.
Video

Video Crime Scenes Re-Created in 3-D Visualization

Police and prosecutors sometimes resort to re-creations of crime scenes in order to better understand the interaction of all participants in complicated cases. A Swiss institute says advanced virtual reality technology can be used for quality re-creations of events at the moment of the crime. VOA’s George Putic reports.
Video

Video Sierra Leone Ebola Orphans Face Another Crisis

There's growing concern about the future of an orphanage run by a British charity in Sierra Leone, after a staff member and his wife died this week from Ebola. The Saint George Foundation Orphanage in Freetown is now in quarantine, with more than 20 children and seven staff in lock-down. The BBC has agreed to share Ebola-related material with Voice of America because of the difficulties faced by media organizations reporting the crisis. Clive Myrie reports from Sierra Leone.
Video

Video Growing Concerns Over Whether Myanmar’s Next Elections Will Be Fair

Myanmar has scheduled national elections for November that are also expected to include a landmark referendum on the country's constitution. But there are growing concerns over whether the government is taking the necessary steps to prepare for a free and fair vote. VOA Correspondent Steve Herman was recently in Myanmar and files this report from our Southeast Asia bureau in Bangkok.
Video

Video Nigeria’s Ogonis Divided Over Resuming Oil Production

More than two decades ago, Nigeria’s Ogoni people forced Shell oil company to cease drilling on their land, saying it was polluting the environment. Now, some Ogonis say it’s time for the oil to flow once again. Chris Stein reports from Kegbara Dere, Nigeria.
Video

Video Fuel Shortages in Nigeria Threaten Election Campaigns

Nigeria is suffering a gas shortage as the falling oil price has affected the country’s ability to import and distribute refined fuels. Coming just weeks before scheduled March 28 elections, the shortage could have a big impact on the campaign, as Henry Ridgwell reports for VOA.
Video

Video Report: Human Rights in Annexed Crimea Deteriorating

A new report by Freedom House and the Atlantic Council of the United States says the human rights situation in Crimea has deteriorated since the peninsula was annexed by Russia in March of last year. The report says the new authorities in Crimea are discriminating against minorities, suppressing freedom of expression, and forcing residents to assume Russian citizenship or leave. Zlatica Hoke has more.
Video

Video 50 Years Later African-Americans See New Voting Rights Battles Ahead

Thousands of people will gather to mark the 50th anniversary of a historic civil rights march on March 7th in Selma, Alabama. In 1965, dozens of people were seriously injured during the event known as “Bloody Sunday,” after police attacked African-American demonstrators demanding voting rights. VOA’s Chris Simkins introduces us to some civil rights pioneers who are still fighting for voting rights in Alabama more than 50 years later.
Video

Video Craft Brewers Taking Hold in US Beer Market

Since the 1950’s, the U.S. beer industry has been dominated by a handful of huge breweries. But in recent years, the rapid rise of small craft breweries has changed the American market and, arguably, the way people drink beer. VOA’s Jeff Custer reports.
Video

Video Video Claims to Show Shia Forces in Iraq Executing Sunni Boy

A graphic mobile phone video is spreading on the Internet, claiming to show Iraqi forces or Shia militia executing a handcuffed Sunni boy. Experts have yet to verify the video, but already Islamic State followers are publicizing it across social media, playing on deep-rooted sectarian fears. VOA’s Jeff Seldin reports.
Video

Video Ukrainian Authorities Struggle to Secure a Divided Mariupol

Since last month's cease-fire went into effect, shelling around the port city of Mariupol has decreased, but it is thought pro-Russian separatists remain poised to attack. For the city’s authorities, a major challenge is gaining the trust of residents, while at the same time rooting out informants who are passing sensitive information to the rebels. Patrick Wells reports for VOA.

All About America

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More

World Currencies

EUR
USD
0.9121
JPY
USD
119.93
GBP
USD
0.6585
CAD
USD
1.2465
INR
USD
62.397

Rates may not be current.