Yahoo!’s Billion Dollar Tumblr Acquisition: Everything you need to know

By now you’ve more than heard about Yahoo’s massive $1.1 billion acquisition of Tumblr. The deal is done, another Internet entrepreneur and early employees become multimillionaires, Marissa Mayer’s Yahoo earns a new shot at digital relevance, and hundreds of millions of Tumblr users go about their Tumbling life as if it were just another day.

There must be more to the story…and there is.

The questions on the minds of financial and technology experts are: Why did Yahoo do this, how does it benefit shareholders and users, and what will happen to Tumblr and its rabid community as a result?

Let’s start with a quick primer of what Tumblr is and isn’t. Tumblr is part blog (microblog to be specific) and part social network. The key difference between Tumblr and other blogging platforms is that it is designed to make it completely effortless to share short forms of text, imagery, video, music, and quotes. Whether you’re on a desktop browser, using the mobile app, or simply sending an email, Tumblr auto formats the post into something you’d expect to see on a fashionable media site. And, Tumblr makes it easy to design or customize the template to portray the style and presentation you wish.

What really makes Tumblr special is its Twitter-like functionality that lets people find and follow those who share and re-share relevant or interesting content.

The key to Tumblr is brevity, creativity and visualization. Contrary to how businesses use Facebook or Twitter, to succeed on Tumblr takes a dedicated, unique, and visual approach, not unlike how businesses take advantage of Pinterest. Doing so is reportedly more than worth it. The Tumblr audience numbers at more than 300 million with 120,000 daily signups. Additionally, Tumblr sees roughly 900 posts per second with 24 billion minutes spent on site each month.

While the acquisition was still rumor and also shortly after the official announcement, I was interviewed as an expert analyst by several media outlets including Los Angeles Times, ABC News, Forbes, San Jose Mercury News, San Francisco Chronicle, Huffington Post, among others. Sometimes the best parts don’t make it into the final articles. That being the case, I wanted to share a collection of my thoughts that were and weren’t published to provide clarity around the acquisition and what it really means.

Is This Yahoo’s Rebirth of Cool?

Certainly Yahoo has a track record of taking cool and making it uncool. Marissa Mayer is trying to bring Yahoo’s brand appeal to a different type of audience. Yahoo sees this as a path to future relevance.

Marissa Mayer is not only trying to make Yahoo cool again, she’s setting the company on a course toward a younger demographic. Like Instagram for Facebook, Millennials are the life force of Tumblr and Yahoo needs new vehicles to find its way toward a new era of digital relevance.

While historically Yahoo may have been viewed as the antithesis of cool, Mayer is extending the company’s monetized channels into new territory. In this deal Yahoo will add business acumen to Tumblr’s thriving social network, helping founder David Karp and the blogging platform cum social network generate revenue that matches its staggering engagement numbers.

I see Tumblr and a host of acquisitions that have yet to come into light bringing a sense of “guilt by association” to Yahoo’s brand. If Mayer and co. can infuse business expertise into the community without disrupting it, Yahoo and Tumblr will increase revenues that, according to industry forecasts, will help it recoup acquisition costs and coolness points starting in 2014.

Why is Tumblr valuable to Yahoo?

For Yahoo, this is about digital relevance and competing for the future.

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.

Tumblr’s demographics, according to Comscore, span the age spectrum with an emphasis on individuals under the age of 34. 22% of users are under 18 and 46% range between 18-34.

The combination of Tumblr + Yahoo! is expected to grow Yahoo’s audience by 50% to more than a billion monthly visitors, and to grow traffic by ~20%.

Similar to Instagram, what many seem to miss is that Tumblr isn’t just a blogging or content platform that thrives online and ports extremely well to mobile, it is a bona fide social network.

Tumblr represents the 3C’s of information commerce: creation, consumption, and curation. People also form networks with one another following and interacting with those who share their interests. Tumblr provides an engaged channel with a founder/CEO in Karp who’s one of the storied pied pipers of Generation-C (connected consumers). Yahoo’s play is to generate revenue by connecting brands with this coveted audience in a network that enjoys engagement numbers that are off the charts. The trick for Marisa and co. is to do so without diluting the Tumblr secret sauce and while drafting enough of the Tumblr brand to make Yahoo cool again.

Will Yahoo tumble Tumblr’s culture and essence?

The value to Yahoo is to absolutely maintain the Tumblr brand. It is the brand that millennials know and love

That Marissa joined the company means she sees promise and opportunity with the company. For that reason she would be wise not to infuse too much Yahoo into Tumblr, just enough to build the Yahoo brand.

As long as the content is fresh and the advertising is not intrusive, the audience, at Tumblr and Yahoo, will only grow and benefit.

Why are people really worried about Yahoo taking control of a loved brand like Tumblr?

During the rise of Web 2.0, Yahoo acquired two of the hottest properties online, Delicious and Flickr. For various reasons, neither property thrived, in fact Delicious was scheduled to be sunset until it was saved by YouTube’s founders Chad Hurley and Steve Chen. Flickr is home to a significant collection of my digital photos. While at one point Flickr was white hot, many believe that the company floundered with a lack of leadership and vision post acquisition. It’s almost as if the site was relegated to management mode. Innovation simply stopped. For example, Flickr could have created what would have been a pre-cursor to Instagram. With the right features and marketing, history could have been different. Instead, Flickr floundered, Instagram was born and flourished and eventually was acquired by Facebook for $1 billion.

The history of acquisitions that tarnished the luster of promising brands goes back to the earlier days of the Internet as well…GeoCities anyone?

Can Marissa do a better job?

As mentioned earlier, Tumblr’s acquisition has everything to do with relevance. Connecting to younger generations takes a different approach, which arguably didn’t exist within Yahoo before Marissa and this series of strategic acquisitions. Marissa is also flexing her business savvy to experts and pundits in the technology and financial sectors. She has a plan.

Marissa isn’t just a CEO trying to manage Yahoo’s media business. Marissa is acting as a technology leader and innovator and appears to be working against a greater vision. So, yes, she will most likely do more for Tumblr if she remains committed to her vision as well as to Tumblr founder David Karp’s mission. In fact, she’ll probably do more good for Tumblr as a business than it was destined for without her.

How will Yahoo more effectively monetize Tumblr?

What Tumblr didn’t do as well as it could was to monetize its potential. Estimates peg Tumblr’s annual revenue objectives at $100 million per year. But, the company earned only an estimated $13-15 million against that goal. This is the value that Yahoo brings to the table. Yahoo can essentially leave the Tumblr brand as is while building a business network to connect its vast array of brands with coveted Millennial audiences. This also represents the challenge. How will Yahoo do this without polluting the stream and ultimately the user experience. Reports revealed that Tumblr was set to experiment with a more pervasive form of native advertising not unlike Facebook’s Sponsored Posts and Twitter’s Promoted products.

Instagram and YouTube weren’t overnight moneymakers for Facebook and Google considering their billion dollar price tags, will the same be true for Tumblr and Yahoo?

Instagram is a social network for photos. YouTube is a social network for videos. Tumblr is a social network for snack-sized portable and shareable content. While each are also channels, they are also strong in mobile and overall engagement. Mobile is the key to the future of media and interaction.

Like Tumblr, YouTube and Instagram share the connection to younger, more enthralled audiences. Each represent a new way of connecting with Gen Y and Gen Z and anyone who lives the connected lifestyle (Generation C).

In time, Google learned how to monetize a network that was sensitive to traditional ads and it continues to experiment to this day with new revenue opportunities. Marissa and her team will be tested by their ability to deliver against Tumblr’s business promise of $100 million per year while not tainting the very essence of the community that helped it become what it is today.

Will Millennials and Teens Stick Around Post Transaction?

Younger users are more ambitious in what they explore. Already some teens are threatening to leave the site. If a site gets stale, millennials start to talk about abandoning the network. If a site starts to feel uncool, it is uncool. It has as much to do with the technology as the culture.

Founder David Karp has to make a strategic effort every day to protect Tumblr’s culture and evolve its culture so millennials feel like it evolves with them.

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