The deal also makes sense for Tumblr, a 6-year-old company
that's raised $125 million to date but just began building out an
ad platform last year, with an emphasis on formats that blend with
its aesthetic, which is about beautiful visuals and animated
According to All Things D, Tumblr CEO David Karp will remain at
Yahoo for at least four years and retain a lot of control over the
Tumblr's sales team is still small and its products still deemed
experimental, though its head of sales, Lee Brown (a 10-year veteran of Yahoo himself), has said
that he expects the company to become profitable this year. Yahoo's
relationships with ad agencies and marketers will certainly help
Tumblr's business along.
"It would give Tumblr an opportunity to expand their ad
packages, and it certainly help them with the sheer organizational
needs of ad sales," said Paul Gunning, CEO of Tribal Worldwide.
Tumblr -- which has about 175 employees -- would also benefit
from Yahoo's infrastructure and back-end reporting systems,
according to Chris Copeland, CEO of Group M Next. "Any time you go
from the startup world to established companies with good
infrastructure around technology and data, there's an opportunity
to move forward in helping brands understand what they're getting
from you," Mr. Copeland said.
Integrating acquired content and inventory can be challenging,
however, something Yahoo lived through when it bought Right Media,
Mr. Copeland observed. And while Facebook's expensive purchase of
Instagram last year so far looks like a success -- and thus far
Facebook appears to have taken a hands-off approach, letting the
Instagram team focus on growing its user base instead of
introducing ads -- there are some notorious flops when it comes to
tech darlings being gobbled up by bigger companies.
Yahoo's 2005 acquisition of Flickr eventually resulted in the
photo-sharing site falling off the map after years of
"What makes Tumblr such an attractive acquisition is it has so
much credibility among this audience that Yahoo and others are
seeking -- this 18-to-24 sweet spot," said Ming Linsley, MEC's senior director of social media.
"The concern everyone has is whether or not Tumblr will lose its
credibility if it's acquired by Yahoo."
And like with all marriages, there's the possibility that Yahoo
and Tumblr are ill-suited for each other even if their mutual
attraction is strong. Deep Focus CEO Ian Schafer, whose agency is
one Tumblr's preferred partners, said he thinks about the site much
more as a marketing solution for brands that are savvy about
publishing content than as a standard advertising vehicle.
Tumblr has been building its ad platform in its slow and
methodical way, and recently introduced ads to users' feeds
on mobile devices only). But it may not be
building it fast enough to suit an ad revenue-driven media company
that's under intense pressure to deliver for Wall Street --
especially at a $1 billion price tag. It seems unlikely that Yahoo
would be content to step back and continue to let Tumblr do its
thing with its product.
"Tumblr's been the biggest exercise in patience, certainly for
its investors," Mr. Schafer said. "I can't imagine Yahoo's going to
continue the patience tour."
Yahoo's stock was down 0.3% Friday, trading at $26.50 a