

Yahoo Board to Meet Sunday to Consider $1.1B, All-Cash Deal for Tumblr - ssclafani
http://allthingsd.com/20130517/yahoo-board-to-meet-sunday-to-consider-1-1-billion-all-cash-deal-to-acquire-tumblr/

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citricsquid
If the deal goes through Yahoo would now own the Tumblr audience, so Yahoo
would have a product with a young audience, the audience Marissa Mayer wants
for Yahoo, however, how would they move that audience over to other Yahoo
products?

An acquisition of Tumblr seems very much like the acquisition of reddit by
Advance Publications. They both have huge audiences that are passionate and
growing fast but have great difficulty monetising their audiences effectively
and are providing no real value to the parent company (other than the
_potential_ for the sites to become profitable). If Yahoo bought Tumblr how
would they ever convert the audience into Yahoo users?

I guess it comes down to: what value is there to any company in "owning" an
audience if that audience has no interest in becoming the audience of the
parent and will actively resist it? People would get very angry if AP started
pushing their ownership of reddit onto reddit users, having Wired articles
automatically frontpaged, things like that would drive everyone away, how will
Yahoo avoid that?

~~~
jerf
"how would they move that audience over to other Yahoo products?"

The way the article is phrased (though we must remember it's third-hand at
best) leads me to believe the strategy may be to go the other direction, to
meld core Yahoo strengths (whatever that may be) into Tumblr. That is,
integrate Yahoo offerings into Tumblr rather than the other way around.

~~~
seldo
Tumblr is ad inventory for Yahoo. Specifically, mobile ad inventory -- most of
Tumblr's revenue comes from mobile ads. Mobile is a huge area of growth that
Yahoo is anxious to stay on top of. They don't need Tumblr's audience to go
anywhere other than Tumblr, and if they're smart they won't even try.

~~~
rhizome
Just redirect the money hose to their own bucket. :)

~~~
pyre
It's a bit more than that. Tumblr will decline if they just view it as a turn-
key solution.

~~~
coldtea
> _It's a bit more than that. Tumblr will decline if they just view it as a
> turn-key solution._

Yes, because they can find the billion offered elsewhere, right?

I call BS. Tumblr would accept even if Yahoo wants to turn it into Zombo.com.

~~~
ma2rten
I read that sentence differently: Not "Tumbler will decline the offer", but
"Tumbler (the platform) will decline in usage, just like geocities did"

~~~
coldtea
A, ok then. Didn't think of that interpretation.

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ghshephard
Well, looking forward to the next Accidental Tech Podcast - should be very
interesting to get Marco Arment's perspective on this. First Instapaper, now
Tumblr.

I wonder which will be a bigger deal for Marco...

[Edit - I also wonder whether he had an inkling that these conversations were
taking place. He has been discussing his tumblr roots a bit more than usual
recently, including his undocumented podcast easteregg that he built into
tumblr, and the fact that the tumblr source code was open source, but not
public, which allowed Marco to use it for future endeavors...

Edit 2: And this little hint from his Blog on May 11th.

"I ended up joining Davidville instead, for less money, because David would
let me work on a brand new Mac with any keyboard I wanted and more than three
feet of desk space. A few months later, we started Tumblr. Turned out to be
the right move. "

]

~~~
aaronbrethorst
Please note, I have zero inside information on this.

Wikipedia attributes cofounder status to Marco[1]. Let's assume that he got a
raw deal from Karp and had a potential 30% stake in the business. He worked on
it for 3 years and 7 months. Let's just assume he fully vested (not quite
accurate, but the math is easier). Over the course of five rounds of funding,
maybe the final ownership stake of the founders was diluted from 100% to
10%[2]. Marco owns 3% of the company, and walks away with a hair over $30
million pre-tax.

[1] <http://en.wikipedia.org/wiki/Marco_Arment>

[2] Handy infographic:
[http://www.bothsidesofthetable.com/2011/10/14/understanding-...](http://www.bothsidesofthetable.com/2011/10/14/understanding-
how-dilution-affects-you-at-a-startup/)

~~~
ghshephard
David Karp has 25% of Tumblr [1], and makes it clear, that to start off with -
it really was just David and Marco.

"...Marco Arment, Karp’s first and, for a long time, only employee at Tumblr."

[http://www.forbes.com/sites/jeffbercovici/2013/01/02/tumblr-...](http://www.forbes.com/sites/jeffbercovici/2013/01/02/tumblr-
david-karps-800-million-art-project/)

~~~
aaronbrethorst

        "Employee"
    

Wow, that's a kick in the balls.

~~~
tptacek
I don't follow. Also: Marco calls himself an "employee" as well.

~~~
aaronbrethorst
Everywhere else, he's described as a cofounder. Being shrugged off as an
employee would be insulting.

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ghshephard
Interesting question - would you rather be a cofounder with 5% equity or an
employee with 6% equity. (In the tumblr case, worth about $10mm more).

Given that most (everyone?) would rather be the employee with 6% equity, it
brings into focus what's really important at the end of the day.

All else equal, the founder/cofounder label might be worth something to the
ego, but, having been one of 100 or so "founders" of Opsware, and also having
worked at a company where the "Founding CEO" joined almost a year after I did,
I've grown to recognize that "Founder" is nothing more than a label, doesn't
really signify that much.

Total Compensation Package (inclusive of equity) is what's important.

[Edit: I guess some people might consider "Founder' of a successful company to
be a proxy for their reputation, and reputation is very, very important, as it
can be leveraged during salary negotiations, or, raising money/hiring. So,
from that perspective, being known as the "Co-Founder of Tumblr" might be
relevant]

~~~
emiliobumachar
I see an analogy to the "Vice President" label in big companies.

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minikomi
With tumblr as a curation hub and Flickr as a pool of images, maybe yahoo will
next aquire a video pool (Vimeo?), a sound / music pool (soundcloud?) ...
Having a small network of creative sites each with their own communities, tied
by a single hub would be pretty cool.

~~~
Pxtl
Except that Flickr shows how poorly Yahoo will manage this acquisition. I feel
sorry for all those Tumblr lovers that will see their favoured product ground
down by mismanagement and neglect.

~~~
AtTheLast
In the past Yahoo has butchered their acquisitions. However, Marissa Mayer is
a product focused CEO. I see her doing a good job of not messing up the Tumblr
experience if Yahoo acquires it.

~~~
yuhong
I think she is already trying to fix Flickr, in fact.

~~~
kmfrk
The iOS app, which is one of said attempts, is outright awful, so I haven't
seen much of a track record to assuage my reservations about her ability to
improve the offerings. Upcoming.org was also shut down in a really stupid way,
regardless of whether you like the service it self.

Very reminiscent of Google's way of going about things, actually. :)

~~~
drgath
> The iOS app, which is one of said attempts, is outright awful

It has a 4.5 out of 5 star rating in iTunes.

~~~
kmfrk
I wonder how many of those people use it for uploading. It's so-so for just
browsing (the images in the feed are - very - downsampled).

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hcarvalhoalves
Isn't something really weird going on in the world when you can sell a company
with almost no revenue (let alone profit) and no obvious business model in the
horizon for $ 1.1B, or is it just me?

~~~
markdown
You are buying the potential for profit.

Not exactly the same thing, but in a way it's similar to buying a broadcast
license. Companies pay millions/billions for the right to project some media
onto eyeballs.

~~~
adventured
Except a broadcast license is protected and inherently limited by the govt.
Tumblr's position in the world is neither (ask all the tumblrs that have come
before). It's really nothing like buying a broadcast license.

~~~
markdown
Please read my comment again. I never said it was the same thing.

> It's really nothing like buying a broadcast license.

Both provide access to eyeballs, and both are bought with the intention of
monetizing that somehow... usually with advertising. That's a similarity in my
book.

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phowat
Curiously, they had this tumblr clone called Yahoo! Meme (
<http://en.wikipedia.org/wiki/Yahoo!_Meme> ). Which, IIRC, was developed by
Yahoo Brazil and I guess marketed mostly in the south american market. I guess
it didn't get anywhere since they killed it in May 2012.

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Apocryphon
If this goes through, it may be amusing to see Yahoo doing better in the
social space than Google (is with G+). Tumblr seems like a very wild, organic
community that is its own social network. If Yahoo treats it the way Conde
Nast has with reddit, it could turn out to be quite the boon for them.

~~~
stanleydrew
Do you think Conde Nast believes reddit has been a boon for them?

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staunch
Of course. They could sell it tomorrow for a nice multiple. They bought it for
like $15 million and could easily sell it for $100+ million.

~~~
parfe
Conde Nast hasn't owned Reddit since 2011.

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staunch
Technically, no, just their parent company.

 _"In September 2011, Reddit was split from Condé Nast, and now operates as a
subsidiary of Condé Nast's parent company, Advance Publications."_

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nwh
Even Archive Team won't be able to save Tumblr.

~~~
kmfrk
I think a lot of people would be interested in supporting a Kickstarter of
some sort, though.

~~~
nwh
I've personally archived a few blogs, and the amount of data on tumblr is just
incredible. Just a single one was almost 2.5GB. There's probably millions of
blogs on tumblr.

~~~
kmfrk
Perhaps image archival could be something for a second tier.

It's just too important to give up over; a half-baked solution is better than
none.

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sdoowpilihp
Yahoo needs a company like this to address two major issues. First, they lack
a social offering. Second, they need to draw in more users, and I imagine
Yahoo is hoping to bring over a large user base to their other products via
integration with their ecosystem. If Yahoo does acquire tumbler, it will be
interesting to see how they choose to integrate it (if they do at all).

~~~
nosrac
Big-time integration would be a huge mistake.

Look at how big of a lead on photography Flickr when Yahoo purchased them.
After the purchased they were told to focus on integration.

Flickr is a shadow of its former self

~~~
eterm
For the first time in 6 or 7 years I didn't renew my Flickr sub this year.

It's not just that I've grown older, it's that fundamentally Flickr no longer
delivers the content and community, and blame for that must lie at Yahoo's
door and their failure to innovate with photo.

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NelsonMinar
Why did someone leak this much information about a secret deal? Kara Swisher
is an awesome reporter and the go-to for this kind of article, but whoever
talked had a reason for doing so. One plausible guess; someone on Tumblr's
board is trying to cement a second offer from another company. This article
now names a price and a deadline.

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UVB-76
Isn't Tumblr an IP nightmare, and wouldn't Yahoo taking ownership make it a
giant target for litigation?

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hkmurakami
I wonder why they're deciding to offer an All-Cash offer rather than some part
of the offer being in Stock. Yahoo's stock has done well lately and should be
fairly attractive to Tumblr investors and management. Given the size of the
potential acquisition, there aren't that many alternative suitors, so Yahoo
should have pretty good leverage here, especially since Tumblr has gotten heat
over the last few years regarding their lack of a business model.

Maybe Yahoo is afraid that offering say ~$400MM in stock would dilute the
existing shares and irritate existing shareholders?

~~~
joshu
you don't want to suddenly create a huge stockholder.

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jasonlingx
Oh no... time to move off tumblr...

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robryan
If this does happen it will be very interesting to see Tumblr's progress over
the next year. Will give insight into whether Yahoo has turned the corner or
whether it is the same Yahoo we have seen in the past 5 years.

~~~
AtTheLast
Yahoo seems to be making a lot of the right moves in terms of product design
and development talent. I think they have a good chance of being able to help
monitize Tumblr in a way that doesn't ruin the user experience. Like you said,
this will be a true test for the new Yahoo.

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dm8
Tumblr is a media company at the core. So it should work out well for Yahoo.

~~~
aswanson
What exactly does that statement mean?

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OGC
Nothing

> Tumblr is a media company at the core.

Tumblr is a glorified blog hoster.

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jordanthoms
The next Flickr? Hopefully they can keep innovating after an acquisition...

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PedroBatista
Too much soap opera style info for someone who is "considering" an $1.1B deal.

It seems a bit odd, and everybody knows how these Hollywood style "romances"
tend to end..

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adventured
Yahoo really needed a product to fill in that Geocities gap.

