Yahoo pays cash for cachet

Tuesday 21 May 2013 11.37
Yahoo pays $1.1 billion on deal to buy Tumblr
Yahoo pays $1.1 billion on deal to buy Tumblr

Marissa Mayer's acquisition blitz continues with the purchase of hipsters' favourite blogging platform, writes Niall Kitson.

Yahoo CEO Marissa Mayer must be getting used to impossible goals by now. First taking the top job at a company regarded by many - including Microsoft CEO Steve Ballmer - as a basket case, Mayer has overseen a wave of acqui-hires in search (Milewise), productivity (Astrid), social (Jybe, Alike), gaming (Loki Studios), mobile (Summly), and has now spent $1 billion on hipster-friendly blogging platform Tumblr.

While Yahoo's recent purchases were about gathering engineering and design talent, Tumblr is different, mostly because it has a big enough cultural impact that people would notice if something goes badly wrong with it. That Mayer promised in a blog post to "not to screw it up" showed she understands the scepticism and the casual nature of the service - no warbling about ‘maintaining the essence of Tumblr’ but just a straight, casual assurance that everything will be fine.

Are users convinced? The short answer is mostly. According to Wordpress founder and Automattic CEO Matt Mullenweg, after rumours of the takeover gained momentum, content was being exported from Tumblr to the Wordpress platform at a rate of 72,000 posts in one hour (the usual rate being 400 to 600 posts). Not that Mullenweg is smug about the growth in users, overall the numbers are barely the equivalent of a protest vote. Tumblr manages 75 million posts and 13 billion page views per day across 108 million blogs.

Unlike many social startups, it has a performing revenue model, bringing in all of $13 million in 2012 - something Yahoo is happy not to change significantly in the next year, despite the introduction of more embedded ads flagged by Yahoo CFO Ken Goldman.

If embedded ads are going to become a source of friction with users there are plenty of outstanding issues Yahoo will have to resolve. Top of the list has to be Tumblr's relationship with rights holders. As a modest business with little money to wage a proper legal defence, Tumblr's reliance on images that have been edited and shared for effect is a massive legal headache in waiting for any owner with pockets deep enough to come to a licensing deal on such a massive scale.

Another issue Yahoo will have to deal with is the proliferation of porn on Tumblr. An edgy startup can afford to foster links with the adult entertainment industry but the more family- (and investor) friendly Yahoo will have to decide how closely it wants to be linked in the public consciousness. Both sides would benefit from some healthy distance.

The biggest concern, however, is that Mayer will "screw up" exactly the same way Yahoo did before with photosharing site flickr and social bookmarking service Delicious - both of which stalled under Yahoo ownership, the latter eventually being sold off to YouTube co-founders Chad Hurley and Steve Chen's Avos Systems in 2011 for between $15 million and $30 million.

Can Mayer prove that cash can buy cool? If she keeps Yahoo's big branding away from Tumblr's indie cred, she just might.

Niall Kitson is editor of TechCentral.ie