
Tumblr May Reject Yahoo’s $1.1B Acquisition Offer For Being “Too Low” - fjw
http://techcrunch.com/2013/05/17/tumblr-is-not-impressed/
======
neya
Here's my perspective as a hardcore tumblr user -

Tumblr is a good example of an 'uncontrolled platform'. What started as a
beautiful blogging platform, has now turned into a junkyard of cat memes,
'blurr-photo-in-the-background' quotes and animated GIF thumbnails of movie
snapshots and softcore pornography. Of course your feed depends on what/who
you subscribe to..but due to the nature of Tumblr's platform, even the best
blogs sometimes reblog either of the junk above, which makes the platform very
painful to use. Sometimes, it takes upto 5 whole minutes to load the entire
dashboard. Also tumblr has a terrible UX implementation site-wide (Example -
if you want to enable the ability of your followers to answer your post, it's
title should end with a question mark, after which a tiny checkbox will pop-up
from no-where which you can then click to enable answers.)

In my opinion, $1.1 Billion is a really good deal for a trashcan full of 99%
animated cat GIFs and 1% decent content. Rejecting it could be a bad idea as
far as I know. Yes Instagram was over-valued, but hey, atleast it didn't come
with animated cat GIF's.

~~~
avichal
Actually, Instagram turned out to be a fantastic deal. Many thought it was
over-valued at the time but Instagram has passed 100 million active users
early this year and users spend more time on Instagram than they do on Twitter
(or practically any other app than Facebook or email). In retrospect, I think
$1 Billion was a steal.

~~~
jonknee
They could have a billion active users and would still have $0 in revenue. I
don't see how it's a steal.

------
daeken
> Tumblr feels that Yahoo’s $1.1 billion offer as “too low” and view it as
> “only a first offer”

And then later in the paragraph:

> sources say the company only has a few months of cash runway left.

This must be a joke. If you have a few months of cash runway left, $1.1B is
more than enough. Seriously. There is no circumstance when this isn't true,
unless you have massive non-cash assets on hand.

Yes, I'm aware that they could go raise more money and try to hold out for
more, but let's be serious here: they make (effectively) no money and they're
being offered well over a billion dollars. Billion -- with a 'B'. This sort of
public posturing is just obnoxious.

~~~
tptacek
I don't understand this mentality and you at least are someone I know I can
engage with. So, tell me, what makes you believe that _you're_ qualified to
determine what Tumblr's worth? "Billion -- with a 'B'"... so what? Tumblr's
worth what they're worth. If they're intrinsically worth more than 1.1Bn
because of stats we don't really know about or understand, there's nothing
unseemly about turning down an offer that undervalues them.

Also: you can't judge what a business is worth solely by their burn rate or
cash on hand. You need more information than that. Every year at a company
that has a burn rate is an investment year; they could be reinvesting their
income for growth, or forgoing that income for same.

(I have no idea what Tumblr is actually worth in 2013, for what it's worth.)

~~~
daeken
At the end of the day, it all comes down to: they would sell for $1.1B in a
heartbeat without any of this public posturing if they knew they weren't going
to get any offers for more money today. They would take the money and be damn
happy about it. Instead, they say "pfft, this is too low! We clearly need more
for our unmonetized product!"

That's the part that pisses me off, not that they value it differently --
because they don't! They know that $1.1B is a great price for what they have
to offer, they just think that they can grumble about it and get a bit more
from someone else. This sort of negotiation isn't skillful, it's heavy-handed
and completely and utterly transparent.

~~~
tptacek
Wouldn't they sell for $25.53 in a heartbeat if they _knew_ they weren't going
to going to get any other offers or money?

~~~
daeken
If they got such an offer, I imagine that they'd be willing to hold out for a
couple months to get something better. But a $1.1B offer? That's not something
you wait to accept. If they don't get a better offer in the next few weeks,
they'll gladly take $1.1B, even if they suspect they can get a bit more in a
few months or a year.

------
pg
Surely twould be more efficient just to tell Yahoo rather than trying to
bounce the message off us.

~~~
lancewiggs
This may be the only legal way of teasing out a response from the other
potential bidders without breaking the exclusive negotiation arrangement with
Yahoo!.

If the other potential buyers indicate somehow that they would pay more, then
the Tumblr board may perceive that the right thing to do is to be unreasonable
on price so that Yahoo! walk away. Tumblr may not approach the others
directly, but of course can read any correspondence that arrives.

It's a a dangerous course, as if there is only one other buyer then they may
counter with a lower offer, and even if there is a genuine auction then there
is the risk that market conditions could change.

And of course all this is also a tactic to nudge the Yahoo! board into making
the 'right' decision.

------
antr
If I were a Yahoo shareholder, even at a $1.1bn price tag, I would vote
against the acquisition.

> Tumblr has no real revenue, let alone profit, making it a value dilutive
> acquisition for Yahoo.

> The acquisition price is artificially being inflated by investors who are
> trying to squeeze Yahoo, who is trying to "turnaround" its profitable
> business. The $1.1.bn price is already "too high" for Tumblr's true
> underlying value.

> Yahoo has no track-record of successfully acquiring, integrating and
> generating value from such acquisitions. Broadcast.com ($5.7bn), GeoCities
> ($3.6bn), Inktomi ($235m), Overture ($1.6bn), del.icio.us ($20m), Flickr
> ($?m), and the list goes on.

I feel sorry for Yahoo's retail investors. I guess "greed is good" when it
comes to startup acquisitions.

~~~
nightmann
> The acquisition price is artificially being inflated by investors who are
> trying to squeeze Yahoo, who is trying to "turnaround" its profitable
> business. The $1.1.bn price is already "too high" for Tumblr's true
> underlying value.

That's the market. If Yahoo thinks tumblr is worth $1.1B, then Yahoo will pay
$1.1B; if not, then they won't. How the price got there (by some artificial
inflation or whatever) is irrelevant.

> Yahoo has no track-record of successfully acquiring, integrating and
> generating value from such acquisitions. Broadcast.com ($5.7bn), GeoCities
> ($3.6bn), Inktomi ($235m), Overture ($1.6bn), del.icio.us ($20m), Flickr
> ($?m), and the list goes on.

All the acquisitions cited are 8+ years old. And it is hard to say whether the
recent acquisitions (within the past, say, 5 years) are doing well or not.

(I would also vote against the acquisition, but for other reasons)

------
nashequilibrium
I see a lot of people talking about Tumblr's userbase rather than the quality
and potential profitibility of this userbase. As someone who has worked in
brand management at P&G, i do not see any major consumer brand who's
personality fits with lol cats and porn, therefore which major brand are you
going to find to put ads next to that crap. Secondly lets take a look at the
demographics and LSM's, tumblr is mainly made up of teenagers, you need to
look at your ad spend relative to the quality of the demographic.

Start a successful extreme sports website and you will find brands like
redbull that's brand fits in with your message, start a music sight and you
will find a brand like pepsi that fits in well. Tumblr is all over the place,
i have no idea how do you control the message? This website was built to just
be cool and over the last six yrs they never tried to tie their identity to
the type of revenue model they were anticipating. The reason for this is
because they did not think of monetization at all. If you started a magazine
back in the day, you would choose your segment and also tie in the magazines
identity with the type of ad revenue you want to generate like a house & home
magazine, you have home depot etc. This is not a billion dollar company. I am
rooting for Marissa but her social media profile is starting to look bigger
than her bite.

I will also add that Tumblr did try their had at curated content a few months
back but decided to scrap the idea. This shows that they understand the need
for more quality consistent content but are unable to execute. Flipboard has
totally taken them to school on this front by allowing people to create
personal magazines and you find a better quality experience. They need to
learn some stuff from Flipboard even though it is not 100% comparing apples to
apples.

~~~
majani
This problem plagues most social networks, but at the end of the day, scale
and proper scale management solves the brand problems you've mentioned.

------
pg_bot
Has there ever been an acquisition similar to Tumblr (company that has existed
for 5+ years that hasn't found a profitable business model) which has
contributed positively to the acquirer's net income? Is there any chance that
this cannot turn out to be a boondoggle, because that seems to be the
consensus among the commenters on HN.

~~~
hboon
YouTube. Possibly Reddit?

Personally I find that in the end, the question should be: can Yahoo! make
better use of the $1B elsewhere? If not, the purchase is worth taking the
chance.

~~~
pg_bot
Neither YouTube or Reddit fit the bill. Both of those companies were created
in 2005 and then sold in 2006. I would argue that they were still in a user
acquisition phase instead of trying to monetize their platforms. 5 years is a
long time to run without figuring out how you are going to become profitable.
Tumblr was created in 2007 and has a lot of smart people working there, why
haven't they figured out how to make money in the past 6 years?

------
jval
In response to some of the critics:

For a good user-generated content comparable, YouTube wasn't profitable until
around 2010-2011[1], 7 years after its founding. It is, of course, very
profitable now and looks like one of the best acquisitions ever made in the
internet space. Google only had to fork out $1.65Bn in an all-stock
transaction for a company which would now be worth many, many times that (some
numbers would say over $50Bn [assuming $5Bn income at a conservative 10x
P/E],[2] I would say many times more).

Revenue is, of course, a massive lagging indicator in the software industry. I
think anyone who sees Tumblr as being overvalued greatly underestimates the
sheer size of their user-generated content library, especially because most
popular externally-facing Tumblr sites have custom URLs which hide the true
size of the network. Most regular internet users will visit Tumblr many times
throughout the day without noticing it. You have to remember that its Alexa
rank has been climbing non stop over the last few years, and it is now at 19
in the US with a steady pageviews/user count (which not even Facebook can
claim).[3]

[1] [http://www.reelseo.com/google-ceo-eric-schmidt-claims-
youtub...](http://www.reelseo.com/google-ceo-eric-schmidt-claims-youtube-
profitability/)

[2] [http://www.benzinga.com/analyst-ratings/analyst-
color/13/05/...](http://www.benzinga.com/analyst-ratings/analyst-
color/13/05/3591307/update-morgan-stanley-raises-pt-on-google-on-rising-valu)

[3] <http://www.alexa.com/siteinfo/tumblr.com>

~~~
rsankar
How much money does YouTube make? After paying content providers and bandwidth
what is the profit margin?

~~~
ericd
Google owns a LOT of fiber, so they pay pennies on the dollar for bandwidth.
It's a pretty perfect marriage.

------
fmavituna
Yahoo should offer more, this can be the best investment since their Geocities
acquisition.

------
DigitalSea
Just because Tumblr is an established platform with a lot of users doesn't
make it worth one billion dollars. Who are they kidding? Yahoo! is offering
them more money than the service which will be a nightmare to correctly
monetise is worth.

Considering Tumblr is a waste dump of animated GIF's and memes it's only a
matter of time before something new and hip comes along and Tumblr becomes
another Geocities.

Remember Geocities? Yahoo! paid 4.6 billion for it back in 1998 and then it
lagged behind and got shut down. 4.6 billion down the drain, Tumblr will be
the next Geocities and the novelty of a free blogging platform all the
hipsters used to use before something cooler and new came along will wear off
like Myspace when Facebook took off.

------
rukshn
I've been using tumblr as my blog platform for nearly 4 years because it
allows easy mobile posting and via emails which makes my posting easy. Yahoo
buying tumblr will ruin tumblr for sure like yahoo has done go the past with
Flickr and Delicious. Yahoo need to innovate and make things happen rather
than buying everything just because they have money. Just imagine what would
have happened to Facebook if Yahoo bought it back then. Yahoo is like the
uncool kid who used to buy the lunch of cool kids so he can sit with them

~~~
jblz
WordPress supports Post by email:

Self-hosted: <http://codex.wordpress.org/Post_to_your_blog_using_email>

WordPress.com: <http://en.support.wordpress.com/post-by-email/>

~~~
rukshn
thanks for the information. I never knew wordpress emails support adding tags
like tumblr up to now. It was really helpful.

The reason I switched from wordpress to tumblr is wordpress started displaying
ads on my blog as they do with some blogs at some times. But if yahoo buy
tumblr should consider switching to wordpress or blogger or some self hosting
platform

~~~
standby
But why? Why just consider switching? Why not wait to see what, if anything,
actually changes? And if those changes are for the better? You had a valid
reason switching from Wordpress to Tumblr, but you don't provide one from
switching away.

There is so much angst from the teenage users using Tumblr that are panicking
about the buyout and making similar threats. I don't expect to see that
mentality without sound reasoning on HN.

~~~
rukshn
yah true I understand. But for some reason yahoo has not being good with
things they buy. Flickr delicious geocities etc. So how can we be sure what
they're going to do with Tumblr and how can we be sure it's going to be
better?

Yah i know it's too early to talk about it. Will see and wait. And from the
news it seems Tumblr directors have given go signal to yahoo offer.

"Forbes' Jeff Bercovici reported Tumblr's board of directors approved Yahoo!'s
offer and the Yahoo! board is expected to go along with Mayer's wish to buy
Tumblr. There's still a little room for things to fall apart, but it's
unlikely that's going to happen. So no, the Yahoo! deal will likely not be
falling apart."

------
negamax
Yahoo, please walk away when there's still time.

------
ameen
It's probably to spark interest among other suitors as well. $1.1B cash offer
isn't "Too Low" as TC makes it out to be.

------
benologist
AOL felt their pageviews for this were "Too Low".

------
Trezoid
Tumblr is, globally, in the top 50 websites by traffic, and in certain major
cities it's in the top 20. Yeah, it's mostly full of cats, angst and porn, but
the user base is both large and dedicated.

------
runarb
It would be bad karma to accept a $1 billion offer from Yahoo.

Previously Yahoo have made tree $1 billion offers, one to each of eBay, Google
and Facebook. All where turned down, and for all it turned out to be the right
ting to do[0].

0: [http://www.inc.com/allison-fass/peter-thiel-mark-
zuckerberg-...](http://www.inc.com/allison-fass/peter-thiel-mark-zuckerberg-
luck-day-facebook-turned-down-billion-dollars.html)

------
EthanHeilman
It makes makes me sad that tumblr is even considering selling to yahoo. I
found Tumblr useful as a simple blogging platform in which other users could
"vote" on content they liked.

Someone should build a straight up reddit-for-blogs.

------
kmfrk
If they end up buying them, I'd gladly contribute some money or computation
power towards archiving the site. I have way too many bookmarks, likes, and
other things tied to the service.

------
hkmurakami
history is littered with companies that ran themselves to the ground after
rejecting good acquisition offers. Will this be another? hopefully not.

------
GlennS
Would you want to sell your company to Yahoo? Yahoo is where companies go to
die.

------
msutherl
The beginning of the end of Tumblr is nigh. About time! What's next?

------
donretag
Remember Yelp?

------
rorrr2
Tumblr's revenue in 2012 was $13M and negative profits (they are actually
losing money).

They "expect" $100M revenue and $60M profits in 2013.

Even if their expectations work, whoever offered them $1.1B is a complete
idiot.

