With the news that Internet behemoth Yahoo will buy blogging and content platform Tumblr for $1.1 billion in cash has many analysts, including this one, wondering what will happen next.
Yahoo clearly wants to buy its way into the social media elite. In December 2005, Yahoo bought social bookmarking site Delicious, but it later sold it in 2011 to the founders of YouTube. In September 2006, it offered to buy Facebook for $1 billion, but Facebook walked away.
And Yahoo CEO Marissa Mayer is clearly looking for the deal of her career.
Yahoo buying Tumblr makes sense. Tumblr is only big, cool, newish social platform that Yahoo can afford.
— Henry Blodget (@hblodget) May 17, 2013
Tumblr’s resistance to pursuing a business model should cause Yahoo’s investors some alarm. Though Tumblr claims 117 million unique users, the company collected only $13 million in advertising revenue last year. The $1.1 billion selling price is most likely based on Tumblr’s valuation of $800 million via its VC investors.
Tumblr couldn’t even afford to pay its 3 editors working on Storyboard, its bold move into publishing original content — laying them off last month.
With more resources put into Flickr last year, Yahoo could bundle Tumblr and Flickr into a photo publishing-blogging powerhouse — doing battle with Instagram, and a way to Trojan-horse itself into Facebook. This would make sense, as Instagram currently allows its users to cross-publish photos to both their Flickr and Tumblr accounts.
Tumblr photos can also be made more prominent when a user performs a Yahoo search — much in the same way that the thumbnails of YouTube videos appear near the top of Google searches.
Additionally, and perhaps the most obvious, Yahoo’s ad network should start to become more apparent through Tumblr, which may unfuriate Tumblr CEO David Karp but given his payout, all will be OK.