On Yahoo-Tumblr

It now looks pretty certain that Yahoo has pulled off a deal to buy Tumblr for 1.1B. The relationship between WordPress and Tumblr has always been pretty friendly: Tumblr’s own blog used to be on WP, WordPress.com supports Tumblr as a Publicize option alongside Twitter and Facebook, our Akismet team sends them daily emails of splogs on the service, and there’s healthy import and export traffic both ways. (Imports have actually spiked on the rumors even though it’s Sunday: normally we import 400-600 posts an hour from Tumblr, last hour it was over 72,000.)

News like this, whether from a friend or a competitor, is always bittersweet: I’m curious to see what the creative folks behind Tumblr do with their new resources, both personal and corporate, but I’m more interested to know what they would have done over the next 5-10 years as an independent company. I think we’re at the cusp of understanding the ultimate value of web publishing platforms, particularly ones that work cross-domain, and while Yahoo’s all-cash deal by some metrics, like revenue, is very generous, I think it’s a tenth of the value that will be created in these platforms over the coming years.

Update: Some people are reading too much into the import numbers — I don’t think there will be an exodus from Tumblr. For more color read the comments on this post.

182 thoughts on “On Yahoo-Tumblr

  1. I’m hoping we get some closure on that $100m in revenue Babe Ruth call in one form or another. That to me was a bigger deal than the $1b+ purchase price if Tumblr could pull it off without alienating their base.

  2. The idea of remaining independent appeals emotionally but you could see it as a healthy thing that, when a service matures to a certain point, a larger company with, presumably, a better monetization infrastructure steps in and pays the founders a meaningful amount that they will, presumably, direct towards innovative new ideas.

    People and companies have different stages in their lives, is it not good that proven, successful innovators get to move on to new adventures?

    Sure, there can be a backlash from users, but startup guys truly who get it are an extremely limited resource, would the Internet be better today if Evan Williams was still running Blogger as an independent company?

    I don’t wish to give any of the WordPress faithful an aneurysm but it wouldn’t necessarily be the end of the world if Automattic got bought out in a similar mega-deal, it might turn out to be rocket fuel that has a substantial and unexpected impact on the Internet as a whole.

    1. I would say that everyone has to keep an open mind to these things, because it’s inevitable that the value you create is wanted by a larger organization with more resources. We have to remember that Yahoo! itself was probably the size of Tumblr or WordPress.com. Now, it’s a massive, multi-billion dollar revenue generator and it’s going to going on a buying spree. They all do, whether it’s Apple, Google, Yahoo!, Microsoft… in the end, a portion of the user base will be angry. But, they’re not the ones that spent many years developing the product. They may use it and want it to stay the way it is, but sometimes in life, things outgrow where they once were and the world changes. So, I agree.

  3. I sure hope you’re right that 10X value will be created. Of course the intangible value that comes from new voices enabled by self-publishing technology is greater than any monetary sum. Thanks to WP and Tumblr for generating so much of that value. Let’s hope Yahoo doesn’t screw it up.

  4. Though you may be correct about that 1/10 of revenue prediction, it’s probably a lot better feeling to have 1.1 Bn in your Bank Account than 11.1 Bn in a may-come-in-the-future-if-all-goes-right-and-the-stars-align bank account.

  5. Matt,

    I don’t know enough about how these crazy internet valuations work but how do you make sense of the massive $1.1 billion price tag when Tumblr reportedly generated only $13 million in revenue in 2012?

    Yahoo! might be the most incredible business on the planet at monetizing traffic but I can’t see how you could get from $13 million in revenue to say $390 million (30x) in revenue in the next 3-5 years to make the acquisition begin to make sense.

    Do you think that sort of growth would be achievable or does a smaller/larger revenue figure in 3-5 years time make more sense to you?


    1. In an advertising business a lot of it comes down to attention: how much and where advertisers spend to get your attention usually lags 3-5 years from where people are actually spending their time, and when that gap closes it can be very impressive. Of course it doesn’t happen for free, there are lots of organizational changes needed to execute on that opportunity, and probably as many people screw it up as get it right.

      I believe there is also an even-larger-than-advertising opportunity around subscriptions and products. The big shift from older forms of media is that people aren’t just passively consuming as they might in front of a TV, they’re creating. It’s a hobby and a passion, not a vice. In that context I think subscriptions are more aligned with users than advertising, and that’s the direction Automattic is pointed in.

      1. Automattic is pointed in the direction of subscriptions? I guess you mean in the sense of a platform and the freemium model — paying for higher-end use and service. Or am I missing your point, and you mean in the sense of paying for content (as with magazine or cable subscription)? Cuz if it’s the latter, that’s news. Curious your thoughts. Thanks.

    2. I think the issue for Yahoo is much bigger than how much of a return they are going to get on their Tumblr investment. If Yahoo stock has a big increase because of this purchase, that alone will justify what they paid. This purchase also increases their overall credibility, their attractiveness to getting great employees, and will most certainly bring more internet users into the other Yahoo services.

      1. Looks like my other comment didnt get posted…lol
        My point is there is no way anyone can predict the future.

        David Karp in 5 years from now could easily say that he wishes he didn’t sell or that he is happy that he took the money and run to the Bank.

        Hint hint, Real estate 5 years go….yeah the prices kept going up….

        No one can predict the future.

  6. Bittersweet indeed. Will Tumblr go the same way as other services now that Big Corporate has taken over, or will those behind Tumblr be allowed to continue what has been – especially in the last couple of months – a series of good upgrades and enhancements?

    There appear to be two feelings on this: (1). Yahoo! will kill the service with adverts and user-unfriendly changes and (2) David Karp should ‘upgrade’ his girlfriend (Daily Mail comments).

    Let’s hope that it goes the path of improvements.

    1. My reply on Techcrunch: FWIW, I don’t think there will be any sort of exodus from Tumblr. For most folks habits overcome internet-outrage. Even if a million people left, that’s just about a week’s worth of signups.

      1. Matt, you say it very well with this comment. While I don’t think Tumblr was worth anywhere close to 1 Billion dollars (cue Austin Powers scene)… I also think most people don’t even know this is happening at all yet, and of the ones who do know it’s happening, I’m guessing most will just go on blogging.

  7. I am not surprised to see Yahoo acquiring Tumblr. I think that the large, older companies like Yahoo and AOL that are the public face of the web, realize that if they don’t have a large social presence they risk being doomed into irrelevance. Looking at some of AOL’s acquisitions of the last three years, which include, TechCrunch, About.Me, The Huffington Post, and gdgt, shows that they are positioning themselves into the Social/News area.

    It will be interesting to see into what area Yahoo will choose to position itself. I think Tumblr is the just the beginning of a lot of acquisitions by Yahoo. I would not be surprised to see Yahoo spending a lot more money over the next few years on a variety of social sites.

  8. Though I understand it’s just another path in a business paradigm to get sold or be absorbed, emotionally, for a end user, it’s hard to digest. You tend to build a bond with a tool that you use to write everyday – be it a hardbound diary or a blog. Tumblr, like wordpress, was built on the ideals of providing users a friendly, free and independent platform for publishing. When I say independent, I mean moulding the product according to how the users want it, and not how the company wants it. I hope (against all hope), with Tumblr, that doesn’t change.

    I still remember when WP2.5 (I think) was out, there was a survey rolled out to choose the best navigation style/icons that the users think WP should adopt. What this creates in the minds of the users is the feeling of ownership and no wonder WP has such wide support from millions in the blogging community.

    That said, I wonder, if Tumblr was in fact, open source, could this buyout be possible?

    1. Great comment. I’m sure Tumblr uses a ton of OS software, and even if the entire platform was open sourced Yahoo could still buy the company. The brand, users, domain, and people are where the value is, not a proprietary license to some # of lines of code.

  9. Tumblr was clean out of cash, and would either have had to grossly compromise their no-ads (or at least minimal ads) policy or looked for other investors. I think it’s in Yahoo’s interest that they keep their integrity and “cool,” but servers don’t run themselves.

    1. What’s interesting about this is that Instagram was acquired with 13 employees for $1Bn. Tumblr was acquired with 170+ employees for $1.1Bn. There’s far more cost in Yahoo’s acquisition of Tumblr than Facebook’s acquisition of Instagram.

  10. So much of tumblr is just porn garbage. They obviously have a valuable site, but I have to wonder how much of that would die if they were a little more strict and had more control over their platform.

  11. I’ve heard over the years that value in owning technology platforms, the fact is that there is no value in any platform. The real value is in the people that build, solve and fix problems. If Yahoo can keep the core team then it may transition into a Yahoo product.

  12. I think this is a good deal for Yahoo! I’ve been rooting for Yahoo lately and I think Marissa Mayer doing good things. I want Yahoo to be bigger competition for Google.