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

Karzai's Legacy: Missed Opportunities?

Afghanistan's president leaves behind a much different nation than the one he inherited, yet his legacy from 13 years in power is getting mixed reviews More

Video Secret Service Chief Under Fire for White House Security Breach

Julia Pierson faces tough questions from lawmakers after recent intrusion at White House, says: 'It is clear that our security plan was not executed properly' More

Frustrated, Liberian Students Want Ebola Fight Role

Thousands have volunteered to go to counties, rural villages to talk to people in their language about deadly virus 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.
Malaysia Struggles to Stop People Joining Jihadi
X
Mahi Ramakrishnan
September 30, 2014 2:16 PM
Malaysian authorities say militant groups like the so-called "Islamic State" have used social media to entice at least three dozen Malaysian Muslims to fight in what they call "jihad" in Syria and Iraq. As Mahi Ramkrishnan reports from Kuala Lumpur, counterterrorism police are deeply worried about what could happen when these militants return home.
Video

Video Malaysia Struggles to Stop People Joining Jihad

Malaysian authorities say militant groups like the so-called "Islamic State" have used social media to entice at least three dozen Malaysian Muslims to fight in what they call "jihad" in Syria and Iraq. As Mahi Ramkrishnan reports from Kuala Lumpur, counterterrorism police are deeply worried about what could happen when these militants return home.
Video

Video Could US Have Done More to Stop Rise of Islamic State?

President Obama says airstrikes against Islamic State militants in Syria will likely continue for some time because, in his words, "there is a cancer that has grown for too long." So what if President Obama had acted sooner in Syria to arm more-moderate opponents of both the Islamic State and the Syrian government? VOA State Department Correspondent Scott Stearns reports from the United Nations.
Video

Video Treasure Hunters Seek 'Hidden Treasure' in Central Kenya

Could a cave in a small village in central Kenya be the site of buried treasure? A rumor of riches, left behind by colonialists, has some residents dreaming of wealth, while others see it as a dangerous hoax. VOA's Gabe Joselow has the story.
Video

Video Iran's Rouhani Skeptical on Syria Strikes

Iranian President Hassan Rouhani expressed skepticism Friday that U.S.-led airstrikes in Iraq and Syria could crush Islamic State militants. From New York, VOA’s Margaret Besheer reports the president was also hopeful that questions about Iran’s nuclear program could be resolved soon.
Video

Video US House Speaker: Congress Should Debate Authorization Against IS

As wave after wave of U.S. airstrikes target Islamic State militants, the speaker of the Republican-controlled House of Representatives says he would be willing to call Congress back into session to debate a formal, broad authorization for the use of military force. VOA’s Michael Bowman reports from Washington, where legislators left town 10 days ago for a seven-week recess.
Video

Video Ebola Patients Find No Treatment at Sierra Leone Holding Center

At a holding facility in Makeni, central Sierra Leone, dozens of sick people sit on the floor in an empty university building. They wait in filthy conditions. It's a 16-hour drive by ambulance to Kailahun Ebola treatment center. Adam Bailes was there and reports on what he says are some of the worst situations he has seen since the beginning of this Ebola outbreak. And he says it appears case numbers may already be far worse than authorities acknowledge.
Video

Video Identifying Bodies Found in Texas Border Region

Thousands of immigrants have died after crossing the border from Mexico into remote areas of the southwestern United States in recent years. Local officials in south Texas alone have found hundreds of unidentified bodies and buried them in mass graves in local cemeteries. Now an anthropologist and her students at Baylor University have been exhuming bodies and looking for clues to identify them. VOA’s Greg Flakus has more from Waco, Texas.
Video

Video Ebola Robs Liberians of Chance to Say Good-Bye to Loved Ones

In Liberia, where Ebola has killed more than 1,500 people, authorities have worked hard to convince people to allow specialized burial teams to take away dead bodies. But these safety measures, while necessary, make it hard for people to say good bye to their loved ones. VOA's Anne Look reports on the tragedy from Liberia.
Colonel Steve ‘Spiros’ Pisanos left Greece and came to the U.S. to learn to fly. He flew fighters for the Allies in World War II, narrowly escaping death multiple times.Colonel Steve ‘Spiros’ Pisanos left Greece and came to the U.S. to learn to fly. He flew fighters for the Allies in World War II, narrowly escaping death multiple times.

AppleAndroid

World Currencies

EUR
USD
0.7866
JPY
USD
109.25
GBP
USD
0.6139
CAD
USD
1.1120
INR
USD
61.428

Rates may not be current.