Yahoo's reported $1.1 billion acquisition of Tumblr faces many obstacles. But it could be a big jolt of caffeine to help Yahoo wake up and work right.
The Wall Street Journal reported on Sunday that Yahoo will buy Tumblr. The deal gives Yahoo access to a huge customer base, and fills some strategic gaps in Yahoo's services.
But Yahoo will have to avoid alienating Tumblr's customers, and reconcile two very different corporate cultures -- a euphemistic way of saying, golly, Tumblr sure has a lot of porn!
The acquisition is yet another big risk for CEO Marissa Mayer, who's shown a lot of moxie in her short tenure at Yahoo -– going on maternity leave soon after she was hired, banning telecommuting, and acquiring a 17-year-old's mobile app for $30 million.
The Tumblr deal gives Yahoo access to a huge user base -– 117 million unique users worldwide, up from about 58 million last year, according to ComScore as reported by the WSJ. But revenue lags; like many Internet companies, Tumblr has spent most of its six-year history focused on building customers and has only started building revenue lately. Its ad-based model generated only $13 million last year.
If Yahoo can keep Tumblr's users, and keep the site growing at its current rate, that suggests a good marriage: Tumblr's growing customer base, with Yahoo's ability to sell ads.
Keeping the users will be tricky. Yahoo is a family-friendly brand, and Tumblr's culture clashes with that. Tumblr has a lot of wholesome content, but it's also a haven for porn, as well as blogs encouraging anorexia, self-mutilation, and other unsavory behavior.
The tawdry content might drive potential advertisers away. On the other hand, General Electric doesn't seem to mind being on Tumblr, nor does retailer TJ Maxx, Whole Foods Market, and many other brands. Rationally speaking, the presence of objectionable content on Tumblr makes it no different from the Internet as a whole. But brands often don't make decisions rationally.
Tumblr has a few other things going for it: It's strong on mobile, where Mayer says Yahoo needs to improve. And Tumblr is both a blogging platform and a social network, while Yahoo does not currently have a social network.
Overall, the acquisition presents a lot of opportunities for Yahoo, if the company can avoid messing up. Yahoo's track record isn't great there: The company previously bought Geocities, Delicious, and Flickr, and failed with all of them. But that was before Mayer came on board and shook things up. I'm rooting for her to succeed.
Want some laughs? Check out what Tumblr users are saying about the deal. But first let us know what you think: Will Yahoo's Tumblr acquisition succeed?
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— Mitch Wagner , Editor in Chief, Internet Evolutiono