Tumblr stumbles into Yahoo!'s clutches

In an attempt to get 'down with the kids', internet giant Yahoo! has bought micro-blogging service Tumblr for the princely sum of £1.1bn.

by Rebecca Burn-Callander
Last Updated: 16 Jan 2014

Yahoo! CEO Marissa Mayer has just made her most expensive gamble to date. She has paid $1.1bn for blogging service Tumblr, the province of savvy tech types and voluble hipsters the world over. Quite the premium on Tumblr’s recent valuation of $800m…

Tumblr was founded way back in 2007, making it a granddaddy of the social web in internet years. But this sudden acquisition has prompted much displeasure amongst Tumblr’s faithful: a petition against the deal has received over 167,000 signatures and one Facebook user posted yesterday: ‘Yahoo! bought Tumblr. Bye Tumblr.’

So, why all the attitude? Well, the deal with Yahoo! has been widely interpreted by the technorati as a move by Tumblr founder David Karp, now 26, to finally cash in on his baby. Karp has been pretty, er, coy about his windfall, but pundits estimate he could make about $250m from the deal.

It's a real about face for Karp, who five years ago stated, 'We would really rather not be gobbled up by a big media company.' But then, up until last year, Karp was also extremely averse to hosting advertising on his site. That's no way to make money, however, and Tumblr has historically failed to turn a profit too. A tie-up with Nike last June brought an end to Karp's no-ads policy and users are now worried that Tumblr will now become a cacophony of MPUs, pop-ups and banner ads. Yahoo! makes the majority of its revenue from advertising, after all.  

Tumblr has a whole lot of users to hawk goods at too. It currently hosts over 108 million blogs with a total of 50.7 billion posts.

As for Yahoo!, through this acquisition, it will gain access to a vast social demographic. Yahoo! has struggled to get its hands on a young, hip audience in recent years, which has seen it lose ground to rivals Facebook and Google. Tumblr also has a significant presence on mobile, the number one cash cow for web businesses right now.

This acquisition looks like a blatant attempt by Mayer to use Tumblr to make Yahoo! cool again. The stalled giant certainly needs a growth story to tell. But did she learn nothing from NewsCorp’s ill-fated acquisition of Myspace?

While Tumblr could direct more traffic towards Yahoo!’s Flickr, which has been shedding users since Instagram hit the scene, that’s where its usefulness ends. The instant – and rampant - antagonism from the blogosphere suggests that rather than boosting Yahoo!’s revenues, the deal could just decimate Tumblr’s hard-won social rep…

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