Home' Trinidad and Tobago Guardian : May 22nd 2013 Contents B32
Guardian www.guardian.co.tt Wednesday, May 22, 2013
Yahoo Inc will buy blogging service Tumblr for
US$1.1 billion cash, giving the Internet pioneer a
much-needed social media platform to reach a
younger generation of users and breathe new life
into its ailing brand.
The deal, announced on Monday, is a bold bet by
Yahoo Chief Executive Marissa Mayer to revitalise
the company by co-opting a Web property with
strong visitor traffic but little revenue.
The combination of Yahoo and Tumblr creates an
online powerhouse with roughly one billion users,
which will draw in more advertisers and help Yahoo
keep visitors on its properties for longer periods of
time, Mayer told Reuters in an interview.
diate growth story for us," she said.
Analysts say Yahoo appeared to be overpaying for
a business that has never posted a profit, makes a
fraction of Yahoo s sales, and may not contribute
significantly to revenue for years. But the company,
rebuffed by the French government when it tried to
pay US$1 billion for video site Dailymotion earlier
this year, had to do something to plug a hole in its
social media efforts.
Yahoo made clear it was sensitive to concerns that
it might damage Tumblr by making it less irreverent
or more corporate.
"Per the agreement and our promise not to screw
it up, Tumblr will be independently operated as a
separate business," Yahoo
said in a statement.
The deal will make
Tumblr founder and CEO
David Karp, 26, a mul-
Tumblr is one of the
Web s most popular hubs
of so-called user-gener-
ated content, drawing
young people who use
the platform to post pic-
tures and text. It has
more than 100 million
blogs in its network,
ranging from White Men
Wearing Google Glass -
a collection of photos
poking fun at the early adopters of the wearable com-
puting devices---to housing-focused The Worst Room.
Though Yahoo remains one of the Web s most
popular destinations, it has seen its revenue shrink
in recent years as consumers and advertisers favour
rivals such as Google Inc and Facebook Inc The deal
is expected to increase Yahoo s audience by 50 per
The acquisition, which will use up about a fifth
of Yahoo s US$5.4 billion in cash and marketable
securities, is the largest by far since Mayer took the
reins in July with the goal of reversing a long decline
in Yahoo s business and Web traffic.
RBC Capital Markets analyst Mark Mahaney called
it a "long-shot/long-term investment" but one that
fits into Mayer s turnaround strategy.
"(Yahoo s) fundamentals have been subpar for
numerous years, in part because of the company s
missing presence in Social and Mobile. Tumblr may
help (Yahoo) develop that presence," Mahaney said
in a note.
While Tumblr is certainly popular---it has tens of
millions of monthly unique visitors in the US---analysts
questioned what kind of contribution it will make
to Yahoo s revenue, since advertising on the site is
in its nascent stages.
Media reports have pegged Tumblr s 2012 revenue
at US$13 million. The privately held company, based
in Manhattan, does not disclose its financial results.
Yahoo expects that Tumblr will help boost revenue
by 2014, Ken Goldman, Yahoo s chief financial officer,
said on a call with analysts. He did not provide specific
"Even if revenue was US$100 million, it means
Yahoo paid 10 times revenue," said BGC Financial
analyst Colin Gillis. "Ten times is what you
pay to date the belle of the ball. It s on the
outer bands of M&A."
Yahoo could quickly boost Tumblr s rev-
enue by combining the website with its own
sales force, said Pivotal Research Group ana-
lyst Brian Wieser. But loading Tumblr up
with banner ads risks alienating its users
and probably wouldn t provide a significant
lift to Yahoo s overall revenue, he said.
"It s not clear that this deal will be
favourable from a return-on-capital per-
spective," Wieser said. "One billion (dollars)
for one company is a big bet."
Gillis and Wieser were contacted on Sun-
day after the deal was reported by the online
publication All Things D.
Mayer, on the conference call, described
the Tumblr deal as an exception and said
Yahoo was not necessarily planning lots of
similarly sized deals.
Yahoo is one of several companies that
have coughed up considerable money for
buzz-worthy start-ups that hold promise.
Facebook bought the popular social media
photo site Instagram for US$1 billion last
year. In 2006, Google paid US$1.6 billion
Yahoo s track record in acquisitions is
patchy. Its US$3 billion-plus purchase of
Geocities---a free service that hosted personal
home pages for consumers and once ranked
among the most-trafficked websites---stands
among the most glaring of its failed deals.
Yahoo shut down the service in 2009.
"It s not lost on me that there were some
large acquisitions done in Yahoo s history
that did not go well," Mayer said in the
interview with Reuters. (Reuters)
Yahoo vows not to 'screw up' Tumblr
of Yahoo and
Tumblr creates an
which will draw in
and help Yahoo
keep visitors on
its properties for
longer periods of
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