Yahoo Acquisitions: I shall eat crow!

Just last week, I said that Yahoo’s approach to acquisitions was one of buy-the-product/build-the-audience.  I was wrong.   Yahoo! is doing both.

Yesterday, the rumor was rampant that Yahoo! was buying Tumblr.  Just seconds ago, it came across the wire, errr screen:  Yahoo! is buying Tumblr for $1.1 billion.  And with that millions of younger, relatively speaking, eyeballs.  And a few deviant ones–which we will get to later.

The cognoscenti believe that Yahoo! is buying Tumblr to gain a social-media website, and gain more ad revenue, faster.  For years, Yahoo! has been under pressure for its lackluster top line numbers; the Tumblr acquisition will hopefully resolve that issue.

For the uninitiated, Tumblr is a tumbleblog, or a shortform blog.  In fact, David Karp, the founder of Tumblr, was waiting for someone else to do Tumblr, and started the company because he got impatient!  The company was formed in 2007 when Karp’s software consulting firm was between gigs.  Karp’s co-founder, Marco Arment, left the firm in 2010 to found Instapaper.  (One never knows when to “Keep the faith.” or ” Give up the ship.”)

Tumblr is more of a photo blogging site.  Instagram, if you may, with a bit of a tail.  The site has extraordinarily high engagement:  108.3 million blogs and 50.8 billion blogs.  In fact, my stepdaughter rushes to Tumblr when she has a spare moment–and even when she doesn’t.  (Homework first, please!)

Also, Tumblr has a healthy presence on mobile, which solves another big Yahoo! problem.  25 percent of Tumblr’s incremental page views are mobile, which is right up there with Facebook, though not at Twitter’s 49 percent.

The price?  What can one say?  The price is the price.  $1.1 billion spread around 175 employees, along with Tumblr’s investors:  Union Square Ventures, Spark Capital, Krum Capital Sequoia Capital, and others who invested a total of $125 million.  Reportedly, the Company had $12 million in revenue in 2012, and is on track to do a nine digit number this year.  A quick test confirmed that the site has a substantial portion of adult content, which Yahoo! will have to navigate to avoid becoming another Craig’s List story.

Did I say that Tumblr was based in New York City?  A huge win for Mayor Bloomberg.  Congrats.

The big forward looking question is how to weave Tumblr into Yahoo! to take advantage of the wealth of Yahoo’s content.  Which is one of Yahoo’s huge strengths.  Yahoo! Finance and Tumblr?  I think not.  But I may be wrong.  And there are plenty of other Yahoo! channels with more consumer appeal.