Highlights of the Tumblr Acquisiton
Yahoo confirmed this morning that it purchased microblogging platform Tumblr in a $1.1 billion deal that has rocked the internet. NPR ran an interesting and enlightening segment on the acquisition, while analysts across the internet weighed in to offer their own opinions on the deal.
Before touching on how awesome this is, let me try to allay any concerns: We’re not turning purple. Our headquarters isn’t moving. Our team isn’t changing. Our roadmap isn’t changing. And our mission – to empower creators to make their best work and get it in front of the audience they deserve – certainly isn’t changing.
In terms of working together, Tumblr can deploy Yahoo!’s personalization technology and search infrastructure to help its users discover creators, bloggers, and content they’ll love. In turn, Tumblr brings 50 billion blog posts (and 75 million more arriving each day) to Yahoo!’s media network and search experiences. The two companies will also work together to create advertising opportunities that are seamless and enhance user experience.
The inherent challenge is how you use Tumblr as an ad platform. With most user-generated content, the question is, 'how do you do that without upsetting the user base?' Add advertising targeted to "tags." Tags are a huge part of Tumblr culture, and one of the biggest vehicles for content discovery on the platform. Tumblr could monetize this powerful feature by allowing brands to pay for their content to show up in the feeds of certain tags, which millions of users follow. For example, Fashion is the #2 tag on Tumblr. A fashion advertiser like Cole Haan could pay to promote their latest Tumblr post into the Fashion tag, showing up in millions of fashion fans dashboards. This would be very similar to how Twitter Promoted Tweets work.
"For all intents and purposes, Yahoo as a media brand skews toward older demographics. Tumblr is ridiculously strong in terms of engagement among Millennials and to some extent Generation Y," Brian Soils, a principal analyst at Altimeter Group, told ABC News. "The trick for Marissa and co. is to do so without diluting the Tumblr secret sauce while drafting enough of the Tumblr brand to make Yahoo cool again," he added.However, some financial analysts believe Yahoo simply paid too much for the company. Rick Summer, an analyst with investment firm Morningstar, said the "deal is probably overpriced" in his analyst note. "In our view, Yahoo has essentially paid a high price for incremental page views without filling in gaps in the business," he added. Summer also points out that one of the factors that has made Tumblr popular with users is the lack of advertising, something which may be difficult to maintain as Yahoo looks to monetize the service.