Yahoo Acquires Tumblr for $1.1 Billion

by Matt Klassen on May 21, 2013

As web giants continue to circle fast-growing start-ups like sharks circling a school of fish, Yahoo has decided to get in on the action, confirming that it agreed to pay $1.1 billion for micro-blogging site Tumblr, along with a “promise not to screw it up.” As part of that promise, under the terms of the deal Yahoo will let Tumblr continue to operate as a separate entity, allowing it to retain “the same Tumblr irreverence, wit, and commitment to empower creators.”

While the deal shows that Yahoo still has some staying power in a rapidly changing technology market, with enough cash to throw at one of the many fast-growing start-ups who have the rapt attention of millions of users (particularly among the youth demographics), I have to wonder what Yahoo hopes to get out of the deal, given that Tumblr generates very little revenue despite its throngs of followers, and that Yahoo’s promise not to screw things up seems to preclude any introduction of advertising revenues.

Simply put, its easy to see how Google makes money off of its ever-growing cadre of products and services, all of them geared towards getting eyeballs on advertising, but its unclear to me exactly what Yahoo hopes to gain from spending over a billion dollars on Tumblr, as silly promises and financial realities offer little hope for the future.

“Our team isn’t changing. Our roadmap isn’t changing. And our mission — to empower creators to make their best work and get it in front of the audience they deserve — certainly isn’t changing,” Tumblr founder and CEO David Karp said on Monday in a statement. “But we’re elated to have the support of Yahoo and their team who share our dream to make the Internet the ultimate creative canvas. Tumblr gets better faster with more resources to draw from.”

Beyond that, Yahoo didn’t articulate its own plans for the micro-blogging site, saying only that the blogging service’s more than 50 billion blog posts would be an excellent resource for Yahoo’s flagging search engine and other services. Yahoo CEO Marissa Mayer did acknowledge, however, that Yahoo would be integrating Tumblr into the company’s web pages.

While it might be difficult to see initially what Yahoo hopes to get out of its $1.1 billion investment in Tumblr, given the blog site’s limited revenues and apparent aversion to being changed into an advertising platform, the fact of the matter may be that Yahoo acquired Tumblr for no other reason than to gain an edge in market growth, as it looks to include Tumblr’s 300 odd million users into its overall user numbers.

To that end, Yahoo is certainly not the only web giant to grab thriving revenue-less tech start-ups, as Facebook notably acquired Instagram and Google grabbed YouTube, both out of the desire to increase growth.

In the end, it’s clear that Tumblr will fit well into the Yahoo family, filling a social networking void that has, to this point, made Yahoo all but obsolete as a one-stop Internet option. While it remains to be seen how Yahoo will monetize Tumblr, if nothing else it’ll at least force Tumblr’s cadre of bloggers to give a passing glance to Yahoo…lets hope that’s worth a billion dollars.

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Written by: Matt Klassen. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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