Entrepreneurship, NYC, Startups, Technology, Venture Capital

Yahoo/Tumblr: Peanut Butter & Chocolate?

8 Comments 20 May 2013

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It had to happen. Tumblr, a next generation content site that epitomizes media creation, consumption and usage of the 21st century and of the net-native generation, has been acquired by a staid, late 20th century, Web 1.0 media brand, Yahoo (I can’t bring myself to add the exclamation point that was such a part of the brand in its heyday).

Why did it have to happen? Given that Tumblr is a VC backed company, the two options for exit were IPO or acquisition. For all of its growth and engagement, Tumblr was struggling with how to monetize its property (and thus stay independent) while staying true to its culture — what created that strong growth in the first place. As the Facebook IPO has shown, this is not an easy task and few companies have made the transition. In fact, many have attributed Tumblr’s fast growth partly to Facebook’s increasingly mass appeal. Users craved a “safe” place where they could belong to several communities based on interests and Tumblr provided that. Tumblr simultaneously provided a decentralized and centralized mode of creation and consumption (and sharing, which added to its viral growth). Yahoo’s content collection method is decidedly last century – which incidentally may still appeal to a large portion of the population if curated properly – but it has developed strong advertising relationships over time.

So the question remains whether a Yahoo/Tumblr combination can infuse Yahoo with 21st century mojo while providing Tumblr an advertising and personalization platform. Theoretically, this is a great combination. However, what often looks good on paper does not translate to reality (witness AOL/Time Warner or that “perfect” couple’s divorce). I’m glad Marissa Mayer is at the helm as she has shown a willingness to take bold risks, and at least her acquisition statements show an awareness of the pitfalls and challenges that lay ahead.

Either way, this is a big win for NYC, which I’ve long maintained is THE most important tech hub of the future: as technology continues to move seamlessly into all aspects of our lives, there is no greater test lab for an entrepreneur than one of the most vibrant, creative, diverse cities in the world.

  • http://www.venturestab.com/ Jerome Gentolia

    Well said Jalak!

  • Anonymous

    Thanks Jerome!

  • http://www.microsoft.com/bizspark Douglas Crets

    Tumblr only brought in $13 million, in REVENUE, last year. For a site with hundreds of millions of users, which seems also to be a bit advertising or promotion shy, I’m not sure what Yahoo can do with this, other than make user generated ad content… Am I missing the boat here?

  • Anonymous

    Doug, there are a quite a few consumer startups that have focused on user acquisition over monetization that have grown rapidly but would have difficulty monetizing on their own (in this case, I think it’s the inherent culture) — I do believe there are creative ways that Yahoo can monetize Tumbr (ie, sponsorship tumblrs) leveraging its ad sales teams. Now whether these opportunities are worth $1B remains to be seen…

  • http://www.microsoft.com/bizspark Douglas Crets

    Great points, understood. Still care to be a guest on my live chat show? I have slots open in July. Interviewing Denis Crowley Thursday. What should I ask him for you? :)

  • http://twitter.com/EliLopez777 Elizabeth Lopez

    Couldn’t agree more. Great article.

  • http://twitter.com/amicusergoest Dan Callahan

    If Tumblr has had trouble monetizing its assets, and if it’s “the inherent culture” doesn’t that suggest that Tumblr leadership will be gone as soon as the lock-up period on options/bonus expires?

  • Anonymous

    Dan, agreed. As often happens with a visionary entrepreneurial founder who sells to a large corporate I don’t envision David staying on for the longer term. He is young and has never worked for anyone else before; and other than any contractual obligations, he has the freedom to do whatever he wants (likely build another company from scratch after taking some time off post Yahoo)

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