On May 20, Yahoo announced its $1.1 billion deal that brought popular blogging website, Tumblr, into its hands. Although the acquisition was costly, the price is not the problem. It’s the unprofitable nature of Tumblr that makes the deal a bad choice.
Yahoo is a media-based company that focuses its primary efforts on advertising. Tumblr has the potential to bring in great advertising revenue, with 300 million visitors and 200,000 new users a month. However, founder and current CEO of Tumblr, David Karp, has continuously expressed his disdain of ads being displayed on Tumblr. That is where the trouble begins. Marissa Mayer, Yahoo’s CEO, stated that Karp will keep his position, and Tumblr will be an independent branch of the company. If Karp’s views persist, and they most likely will, Yahoo’s future doesn’t look any brighter.
Tumblr’s appeal lies in its ingenuity of design and usage. Bloggers are free to post what they want, and personalize their pages without the oppression of advertisements. Karp is determined to keep Tumblr’s aesthetic appeal, which is a sharp contrast to Yahoo’s advertising goals.
In addition, Yahoo has not been successful with many of its previous acquisitions, and is still struggling to keep up with competitors like Google. In the past, the company has spent billions purchasing companies like Geocities and Broadcast.com, only to be met with decreased traffic and outdated material. More recently, Yahoo purchased a mobile start-up company, Stamped, but shut it down shortly after to focus on its own projects. While it’s unlikely Tumblr will meet the same fate, the uselessness of the deal is emphasized by its probable inability to reel in sufficient revenue.
As a self-expressive medium, Tumblr can give off an unfriendly atmosphere for advertising. Latent with pornography, graphic self-mutilation, and otherwise unsightly material, it is not ideal for displaying ads, and sponsors may be turned off.
Another issue that arises is that the pageviews Tumblr receives do not belong to Tumblr itself, but to the individual blogger. It is easy for a sponsor to place an ad on Tumblr, but if the ad is placed on an individual’s blog, things gets complicated. For starters, the sponsor has to be convinced that the blog is worth advertising on. The sponsor then needs to obtain the blogger’s permission to advertise on his or her page and give them part of the profit. The hassle involved deters sponsors and prevents the flow of advertising revenue that is key for Yahoo.
Even if Tumblr and Yahoo’s staff can discover new ways to advertise that work with Tumblr’s unique system, innovation like this will take years to develop and establish. Tumblr is a great platform, and its popularity is only proof of its success among a wide population. But by being joined to a multi-purpose company like Yahoo, Tumblr’s niche as a blogging website won’t deliver for Yahoo, at least not anytime soon.
The Yahoo company has a long way to go, and if it wants to expand and overtake competitors, it needs to channel its efforts beyond snatching up companies and advertising. In the one year alone that Marissa Mayer ran the company, Yahoo has bought 10 companies, but hasn’t done much with them even when advertising is concerned. Similarly, the Tumblr deal was rushed, and will probably prove to be more of a burden than an asset for Yahoo.
The deal can go from bad to worse if Yahoo receives little to no return on it, especially because of the large amount of money that has already been invested in Tumblr. When the acquisition is put into perspective, Yahoo won’t get much out of Tumblr except the title of owning one of the most popular blogging websites on the Internet.