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Yahoo to Puchase Tumblr - Is it enough?

5/23/2013
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Have you heard?  Another millennial, techie genius, entrepreneur has struck it rich using that uniquely American combination of creativity, moxie, and persistence.  David Karp, age 26, never completed high school or college but he started learning HTML at 11 and offering his web design services to local businesses soon after.  After working for various tech firms, Karp and a partner developed the popular website Tumblr.  Earlier this week Yahoo announced that it would be purchasing the microblogging site for $1.1 billion – meaning a $275 million payout of Karp.  Not bad for a 26 year old.  Not bad at all.

So, what’s Tumblr?  And why is it worth so much to Yahoo?  Tumblr is a site that allows users to post content and create blogs.  The blogs can be shared with others or made private.  As of this month, Tumblr has 108.2 million blogs and is home to 50.8 billion individual posts.  Tumblr users are decidedly younger than other social media users.  They also tend to have higher incomes, with 1/3 reporting household earnings of $100,000 +.  This combination of “young” and “rich” makes Tumblr users especially attractive to advertisers, and thus to Yahoo.  Karp has described Tumblr as “a platform for creativity.”  This intention is clear in the elegant styling of the site.  Tumblr blogs are beautifully done and can allow relative newcomers to create beautiful, high end looking pages. So, Tumblr has the audience and it has the design, but is it enough to make Yahoo cool again?

Yahoo thrived in the 1990’s.  At its height its stock was valued at $118 per share.  But then the dotcom bubble burst and things began to go awry for the company.  Since 2001, Yahoo’s story has been one of mass layoffs, failed deals, and ousted CEOs.  This is also not the first time Yahoo has attempted to buy its way into relevancy. The firm purchased GeoCities, HotJobs, Broadcast.com, Overture Services, Right Media, and eGroups.  With the exception of eGroups, these acquisitions have done little to help Yahoo maintain relevance.

Then came new CEO Marissa Mayer.  She shook things up a few months ago when it was announced that Yahoo would no longer allow employees to work from home.  Mayer’s youth and energy have led to big changes at Yahoo, and it makes sense that she would go for the similarly youthful and energetic Tumblr as she works to rebrand the company.  Skeptics are already reporting the deal a failure – stating that Tumblr users are leaving in droves and that Tumblr’s free and open ended culture will not fit with Yahoo’s corporate one.  The number crunchers also question Yahoo’s ability to monetize a site like Tumblr, which currently offers only limited advertising.

In the end, I don’t think Tumblr will be enough for Yahoo.  While it probably won’t close up shop like GeoCities or get sold to a competitor like HotJobs, the microblogging site will not be the silver bullet necessary to return Yahoo back to its’ former glory.  Maybe it’s an old fashion notion, but I think that if Yahoo is going to thrive it will be because of an original and unique product that comes from within the company, not from swallowing smaller, more innovative companies.

Nicole Palmisano

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