It’s not every day that one of Web 1.0’s largest players buys up another company in an all cash deal, but with one looping .GIF, Yahoo announced that its board had given the okay to buy up Tumblr for $1.1 billion. Cash. For those of you keeping score at home, that figure is roughly a fifth of Yahoo’s total available cash!
To compliment the GIF, Yahoo CEO, Marissa Mayer, added the following:
We promise not to screw it up. Tumblr is incredibly special and has a great thing going. We will operate Tumblr independently.
Yahoo has been on a buying spree as of late and though the actual amount of revenue that Tumblr brings in is a well kept secret (Tumblr is a privately held company and does not have to release financial data), the buy shows that Yahoo is serious about being your content distributor for all things internet. Going by last month’s earnings call, it appears that Mayer’s long-term vision for Yahoo involves keeping eyeballs on Yahoo even when pointing you somewhere else.
WHAT WOULD GOOGLE DO
Though many financial watchers seem at best perplexed and at worst outright cynical about Yahoo’s acquisition, it is in fact the very thing that Google has done well. By absorbing Tumblr, Yahoo hopes to gain traction in a younger demographic that has long been out of its reach. Let’s face it, most of us remember Yahoo as the original web search that Google killed; and judging by user-stats, if you’re on Tumblr you probably don’t remember a world where Google wasn’t king of the hill.
Mayer knows that Tumblr may be the only way to gain back some advertiser interest as it faces its next big competitor: Facebook. Even Google is cautious of Facebook’s stabs at being the webs largest content portal. After all, we aren’t paying for these services, we are probably their product. Tumblr is one of the few avenues for Yahoo to establish a significant presence to woo ad dollars. Google has Google Plus and the litany of free services to offer; now Yahoo has a connected social network of its own.
IS IT WORTH THE RISK
The truth is there’s no way of knowing ahead of time whether or not Mayer made the right decision in putting up a fifth of the company’s cash to buy Tumblr – a company that could not find a way to monetize on its own; and in that failure is an opportunity for two companies to create a mutually beneficial relationship and at least give them a fighting chance. By themselves, Tumblr would probably not find enough interest to continue to be the home to the internet’s vault of animated GIFs (note: Link takes you to a Tumblr search for “animated gifs” may be NSFW) and Yahoo would find itself feebly a current of fleeing users in their curated garden.