Money doesn't only talk, it tumbles!
Yahoo announced at a news conference on Monday that it indeed, as speculated, acquired the popular blogging/social media site, Tumblr, the Los Angeles Times (and just about every other news outlet) reports, for $1.1 billion.
This is the largest such deal since Facebook (News - Alert) acquired Instagram in 2012.
Though Tumblr is trendy – bringing in around 300 million visitors each month – and Yahoo has long needed to up its “cool factor,” this is a risky move for the company. It could be either the beginning of a new, fortified regime or the collapse of a brittle dynasty.
The chief executive officer of Yahoo, Marissa Mayer, told analysts during the conference that Yahoo is “making a sincere promise to not screw [Tumblr] up.”
It was a sweet, slightly humorous promise, but one has to wonder what it means when a company that just made such a whopping purchase has to give such a disclaimer upon official release of the news. It's like giving a toast at a wedding and mentioning divorce with a shy giggle.
Launched in 2007, Tumblr has become a popular destination, especially among the young-ins, where Yahoo needs to get some swagger going. But the site, created by the precocious high school dropout David Karp, hasn't found a way to thrive in terms of advertising. With Yahoo as its new Mommy and Daddy, this will likely change.
Investors will certainly want to see big results from such a pricey acquisition. Yahoo is paying mostly cash for Tumblr – and there's not all that much left. Taking over Tumblr will eat up roughly one-fifth of the $5.4 billion in cash that Yahoo had at the end of March.
How could Yahoo mess up Tumblr, you ask? Well, for one thing, it will likely look to solve the advertising problem. Good for advertisers, but possibly bad for users. If Yahoo litters Tumblr with the advertising it has thus far failed to deliver, will people abandon it? Frankly, it's nice to have at least one social media spot that isn't simultaneously a marketing medium.
Social media is a delicate beast. One lousy move and the crowds migrate to some place better. Does Yahoo have the guts and expertise to handle the teen and young-adult oriented blogging site?
Both Mayer and Karp – who will be working with Yahoo – believe the two brands can complement each other. Tumblr can implement Yahoo's search engine to help users browse, while Tumblr's abundance of content could be plugged into Yahoo's other services to give it a youthful makeover.