It's all but official. Yahoo's board has reportedly approved the plan to buy Tumblr for $1.1 billion in cash. Tumblr's board has reportedly agreed to the deal, too. So, unless something goes wildly wrong, then Yahoo is going to own Tumbl...
It's all but official. Yahoo's board has reportedly approved the plan to buy Tumblr for $1.1 billion in cash. Tumblr's board has reportedly agreed to the deal, too. So, unless something goes wildly wrong, then Yahoo is going to own Tumblr, the simple blogging/social network site. According to Quantcast, Tumblr had 184 million unique visitors, and 12.1 billion pageviews last month. Despite those impressive numbers, it's light on revenue, which is making a lot of people question the wisdom of spending $1.1 billion in cash on the site. We think this is a win for both Tumblr and Yahoo. Yahoo gets a big, young audience. Tumblr gets a more money, and time, to figure out its business. Here's the longer explanation of those two points, from our previous report on the deal: Yahoo CEO Marissa Mayer is perfectly positioned to give Tumblr CEO David Karp what he wants. You might think David Karp would sell Tumblr to Yahoo for $1 billion because it would put $250 million in his pocket. You would not be stupid to think this. $250 million is a nice incentive for anyone, let alone a first-time entrepreneur in his 20s, like Karp. But… Karp has gotten lots of offers to sell Tumblr at prices that would make him rich over the years, and he's resisted them all. Why would he sell this time? Easy: Karp and Tumblr have problems like never before… Tumblr does not have a COO and the board wants him to hire one, Tumblr is light on revenues. (Karp disputed this in an earlier story, but sources told us Tumblr is doing OK on revenues – it's marginally behind plan.) Tumblr needs cash to keep running and growing. Selling to Mayer solves all those problems. To keep Tumblr's servers going, Yahoo has billions of dollars in cash. As for revenues and a COO? Mayer, we're guessing, will tell Karp not to worry about either for now. Mayer, according to lots and lots of sources who have worked with her, is not concerned with things like "revenue" and "money." She's much more focused on "product" and "user-growth." Right now, Yahoo shareholders are happy to let her do that. That's because Yahoo shareholders are not shareholders because of Yahoo's core business or core products. They are Yahoo shareholders because owning Yahoo is the only way to make a pre-IPO bet on Alibaba, a successful Chinese Internet company that Yahoo owns a big stake in. So Mayer is perfectly able to spend a billion dollars on Tumblr and allow Karp to keep running it relatively ad-free. This in turn, should keep Tumblr growing, since users hate ads. Buying Tumblr helps Yahoo solve one of Yahoo's biggest problems: mobile. Sometime in the next couple years, more people will be accessing the Internet through mobile devices than through PCs. This trend is bad news for Yahoo, which has limited mobile reach and even more limited mobile usage. (Its reach numbers get a boost because Yahoo gets credit for having a weather app installed by default on every new iPhone. This is despite the facts that the Weather Channel provides the data for the app, Apple built the app, and Yahoo sells no ads in the app.) Tumblr, despite a rocky start in mobile, now has TONS of mobile users. Check out this table from ComScore, which shows that Tumblr is, relatively speaking, about as strong as Facebook in mobile, and much stronger than Yahoo: Please follow SAI on Twitter and Facebook.Join the conversation about this story »
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