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Tumblr May Reject Yahoo’s $1.1B Acquisition Offer For Being “Too Low” (techcrunch.com)
61 points by fjw on May 18, 2013 | hide | past | favorite | 50 comments

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.

I have to agree. If Yahoo is offering this much, they need to take it, because I don't believe Tumblr will ever be successfully monetized.

Instagram had 500m in cash and Tumblr is running out of the money. So this is the good exit for Tumblr

Hey, it's for the millions (I presume) of "Yahoo!News" readers out there, so I'd say "product-market fit": achievement-unlocked.

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.

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

$1.1 Billion is a really good deal for a trashcan full of 99% animated cat GIFs and 1% decent content.

Have you read Yahoo news lately? It's dumbed-down sensationalistic garbage that makes Tumblr look absolutely brilliant in comparison.

Don't the generally just get news from Reuters and AP?

> 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.

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.)

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.

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?

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.

"I don't understand this mentality"

I think the mindset that describes people who say something like this may echo what others might think. Particularly the saying "pigs get fat, hogs get slaughtered" comes to mind [1].

Also the idea that value doesn't change and that there is no downside risk to not sellig for 1.1b cash (there is since there is always a down side to any decision to some degree).

I know of business people on a smaller scale who had passed up a almost perfect deal and held out and lost the entire deal because some event happened to change the circumstances. (Health of an individual, market, neighborhood, events (like 911, wars etc.) whatever. Things can and do change.

Take your firm that you sold for example. It is made up of key individuals. At a certain point you decided to sell. What if you had held out? Could have gotten more perhaps but also could have had something happen to a few key individuals that might make the firm less attractive. (Not thinking security consulting going out of favor though obviously).

While non of the examples that I am giving apply to tumblr I'm just pointing out that people tend to not look very closely at what they stand to lose vs. what they are holding out for. At least from what I have seen over time.

I don't know if 1.1 is the right number or not, just trying to give another angle to this.

[1] Greediness maybe that's the word I am looking for here.

"If you have a few months of cash runway left"

Keep in mind that there are many sources of money that you can get to keep you afloat if you have a defacto value like that. (This is not like the local bakery that only has a few months of cash and a local businessman comes along and offers to buy for a nice price - better not pass it up!)

1 billion is the new 1 million.

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

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.

Why waste a good opportunity for more PR?

Given the nature of the Silicon Valley echo chamber, I don't think they'll have any difficulties in getting the message to Yahoo.

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.

> 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)

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.

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.

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.

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.

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?

Reddit was, at least recently, in the red.

However, Conde Nast no longer owns Reddit directly, so Reddit has no effect on Conde Nast's net income (only their shared parent company's).

Also, in Reddit's case, an argument can be made that it's a 'loss leader' - it may be operating in the red, but the value it adds to their portfolio of publications as a whole justifies the cost.

(Consider, for example, the alternative: shutting down an unprofitable Reddit, at which point all the users flock to the "next" discussion website which they don't own and control.)

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...

[2] http://www.benzinga.com/analyst-ratings/analyst-color/13/05/...

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

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

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

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

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.

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

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

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.

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."

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

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.

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

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.

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-...

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.

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.

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

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

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

Remember Yelp?

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.

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