Yahoo buys Tumblr for over $1 billion — a bad deal or a good one?

A few years ago, a young photographer casually asked me, “Do you have a Tumblr?”

I wasn’t even sure what he was talking about.

But since I started blogging just over two years ago and since I’m a teacher of journalism classes at Armstrong Atlantic State University, I’ve spent some time figuring out what Tumblr is all about. More of my opinion on that in a minute.

Tumblr had about $14 million in revenue in 2012. Yahoo is now apparently purchasing the business for $1.1 billion. Huh?

From Forbes’ The Intolerable Revenue Lightness Of Tumblr:

So Yahoo paid $1.1 billion for a company that made $14 million in revenue last year. It took Tumblr five years to generate as much annual revenue as a moderately well-managed New York deli. You know – the sort that offers more than six cheese varieties.

But before we jump on the bandwagon bashing Yahoo and CEO Marissa Mayer, consider this piece from Business Insider in January: Here’s Tumblr’s Total Revenue For 2012 — And How It Will Make A Profit In 2013. From that piece about the recent moves of Tumblr CEO David Karp:

But so far Tumblr has been very careful. It has restricted paid media to its “radar” and “spotlight” features, which take up a tiny proportion of each user’s dashboard. Most of those paid ad exposures can’t be seen unless you have an account and are logged in.

Tumblr hasn’t even begun to sell most of its real estate to advertisers.

Yet Karp has moved closer and closer to the ad biz all through 2012. Consider:

  • He signed up a traffic analytics company, Union Metrics, to give marketers real performance data.
  • He named 12 agencies to a hot list of companies tapped to work with Tumblr.
  • He poached Groupon sales chief Lee brown to be Tumblr’s ad sales chief.
  • He set a minimum buy-in price of $25,000.
  • He hired Rick Webb of The Barbarian Group to build sales and marketing.

And he did all this after spending years insisting he was not interested in advertising, a position he maintained even in early 2012.

Given its traffic, if Tumblr were to install even the most basic web ad operations — by selling a native ad format on a private exchange, for instance, like Facebook does — it would instantly become fantastically profitable.

Even if it alienates some users, advertising on Tumblr will have an instant, dramatic reach since it’s a wide open field.

Still, it’s an interesting — and big — gamble, one that has brought Tumblr co-founder and CEO Karp personal wealth of $275 million.

From the BBC’s Tumblr and Yahoo: Why sex, jokes and gifs are worth $1.1bn:

Yahoo is desperate to be cool again.

And, like that kid at school who always got the newest gadgets and video games to impress his “friends”, there’s seemingly no shortage of money available to get what it wants.

Now, just two months after splashing out millions on a UK teenager’s app Summly, Yahoo is set to buy one of the hottest properties in social media: Tumblr.

It will reportedly cost $1.1bn (£723m), a smidgen more than Facebook paid for photo-sharing service Instagram last year.

Yet with users already threatening to leave Tumblr en masse, will simply owning something trendy actually boost Yahoo’s internet cred?

“It’s very hard to just buy something cool from somebody else and for it to remain cool,” says Robin Klein, a partner at technology investors Index Ventures.

I started a Tumblr a little less than a year ago as another place for showcasing some of my photography while at the same time attempting to drive a little more traffic to this blog. All these months later, I rarely update bill dawers photography and the site gets just a couple of unique visitors per day.

Still, the sheer visual ease of Tumblr and the ability to customize pages with various themes are natural draws, especially for younger people trying to assert their individuality (even if thousands of others are using the identical theme).

I routinely look at a number of different Tumblr pages, all of which are visually stimulating and satisfying in ways that ordinary blogs, websites, and Facebook pages are not. I periodically check in with performers like Triathalon, Heyrocco, and Astronautalis. But such Tumblrs aren’t very effective at guiding new listeners — they’re really for fans who already feel they’re on the inside.

I love seeing what’s on Michael Stipe’s mind these days and occasionally visiting more esoteric sites like The Paris Review, which asks a great question tonight:

If William Faulkner were with us and knocked on your door tomorrow, where in your neighbourhood would you direct him for a whiskey?

In spite of such obvious positives, I have some major reservations about Tumblr.

First and foremost: is the “reblogging” of images on sites like Tumblr and Pinterest tantamount to copyright violation?

And what about all the disturbing stuff on Tumblr that seems to be far more worrisome than what can be found on Facebook or on other social media sites? Just one example: the steady stream of posts by young women and girls advocating anorexia.

Then of course there’s all the porn, which tends toward the quick publication of viral imagery, often of “amateurs”, “selfies”, and the like. There seems to be a wide range of opinions on how much the site relies on porn for its traffic. From the HuffPo’s Tumblr’s Porn Can Stay, Suggests Yahoo CEO Marissa Mayer:

Tumblr pornographers, take heart: Yahoo comes in peace.

During an investor call Monday morning announcing Yahoo’s $1.1 billion acquisition of media network Tumblr, Yahoo chief executive Marissa Mayer emphasized that Yahoo wants to “let Tumblr be Tumblr,” which she suggested would include allowing its numerous X-rated accounts to continue pumping out pornography undisturbed. […]

“I think the richness and breadth of content available on Tumblr — even though it may not be as brand safe as what’s on our site — is what’s really exciting and allows us to reach even more users,” said Mayer, who did not mention pornography as such, but referred obliquely to content that was not “brand safe.”

But it might not be that easy. From a 2011 Gawker post The Porn and Spam Behind Tumblr’s Meteoric Rise:

But the obvious prevalence of Tumblr smut, combined with the company’s public ambivalence about it, means Tumblr’s traffic is not as sustainable as, say, Wikipedia’s. It’s not hard to imagine Tumblr cracking down on adult content to appease advertisers; it would hardly be the startup’s first controversial or heavy handed content intervention.

And is any company worth $1.1 billion if Google search trends have such a short history — no matter how impressive that history might be?

So many interesting issues here that are worth watching.