Internet giant Yahoo announced its purchase of popular blogging site Tumblr Monday morning, after writing a whopping $1.1 billion check.
Tumblr is a blogging site founded in 2007 that has recently risen to fame as one of the Internet’s most popular sites. There are currently 108 million Tumblr blogs whose 50.6 billion posts are viewed by 300 million unique monthly visitors. These are certainly notable numbers and, thankfully for Yahoo, they aren’t showing any sign of slowing down. There are, on average, 900 new posts per second and 120,000 new signups every day. For a bit of perspective, this places Tumblr in ninth place for the most visited websites in the U.S.
The site is particularly popular with young adults and teenagers. This acquisition represents a strategic move for Yahoo, with many pundits suggesting that it is indicative of a new push to get younger generations to adopt the website, which now receives the majority of its traffic from a more elderly and less tech-savvy demographic. By integrating Tumblr, Yahoo executives hope to reclaim some of this lost traffic.
This is especially imperative given that Yahoo has been increasingly losing ground to sites like Google and Facebook. Although Yahoo remains a relatively strong publically traded company, it has been impossible to escape the reality that younger users are abandoning it in droves.
Although this deal may initially seem to be perfect, it has some observers worried. As Yahoo generates a large portion of its revenue with advertising, many have been quick to point out that Tumblr’s ad-free platform may present a large problem. Traditionally, all blog pages on Tumblr have been completely free of advertisements placed there by the company. However, in the last year, Tumblr has experimented with “native ads” placed on the dashboards of users, which generated $13 million on a trial basis last year.
Despite this, it should be noted that Yahoo’s primary objective in purchasing Tumblr is acquiring traffic from the younger users it so obviously lacks. Although Tumblr has projected ad revenues of $100 million this year, the primary business goal of this purchase has more to do with brand revitalization and less to do directly with the company’s immediate balance sheet.
For the time being, Tumblr won’t be seeing too many drastic changes. Founder David Karp will be staying on board for at least four years to control the design and development of the site, which will ideally allow it to retain its youthful appeal.
Although this may initially be a good acquisition for Yahoo, the company’s history doesn’t allow for too many encouraging predictions. Yahoo has tried this before, when it purchased other hot internet giants such as Flickr and Geocities and then managed to completely tank them within a few short years. Also, the $1.1 billion in cash that Yahoo is paying for Tumblr is most likely a singular purchase. The company would likely avoid making another purchase of this magnitude in the foreseeable future.
With the speed at which Internet trends develop, change and ultimately get phased out, Yahoo is betting quite a lot on the continued success of Tumblr, a prospect that may not necessarily be economically viable. Perhaps the most telling detail is the curt statement issued by Yahoo CEO Marissa Mayer, which stated that, “We promise not to screw it up.” Only time will tell if this is a promise that the company can keep.
[Sources: AllThingsD, VentureBeat, CNN]
Image Source: unhealthyregret.tumblr.com
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