Yahoo Tumblr Acquisition: What went wrong? (Step by Step Analysis)
Yahoo Tumblr Acquisition
Yahoo acquired Tumblr in 2013. Did this decision prove to be over-ambitious? How Yahoo lost about a billion dollars in a company that was supposed to have a great fortune? Let’s understand the complete scenario step by step in this event of Yahoo Tumblr Acquisition.
Yahoo is an American web service provider. It provides a web portal, search engine, directory, Yahoo mail, online mapping, video-sharing, and social media website. It is headquartered in Sunnyvale, California and was founded by Jerry Yang and David Filo in January 1994 and was incorporated on 2nd March 1995.
Tumblr is a microblogging and social networking website. Users can post multimedia content in the form of short blogs. As recorded on 12th August 2019, it hosts 475 million blogs. In January 2016, the website was hosting 500 million monthly visitors that dropped to 400 million in August 2019.
Yahoo acquired Tumblr (2013)
Yahoo acquired the microblogging platform Tumblr for $1.1 billion in 2013. During the acquisition, Yahoo’s CEO was Marissa Mayer and Tumblr’s CEO was David Karp.
Yahoo was losing online traffic traction to rivals like Google and Facebook.
At the time of the acquisition, Tumblr was one of the most successful user-generated content sites in the world. It was hosting more than 108 million blogs, 300 million unique visitors a month and views 900 posts per second.
The aim behind this acquisition was to increase page views a month to Yahoo. It was expected that the combination of Tumblr and Yahoo will grow Yahoo’s audience by 50% and traffic by approximately 20%. Tumblr was independently operated as a separate business with the same CEO.
Yahoo Tumblr Acquisition Analysis
In 2015, Yahoo announced it wrote down the first impairment charge of $230 million and a second impairment charge of $482 million from Tumblr. The total charge was $712 million.
(*Impairment is a reduction in the recoverable amount of a fixed asset)
The competitors were Facebook, Google, Twitter, and Snapchat. Facebook and Google had beaten Tumblr beat in big data, while Twitter and Snapchat were leading in the user interface segment. The main problem with Tumblr was its 80% userbase that used mobile devices.
Tumblr was having a target of $100 million in revenue generation for 2015. But even though having such a big user base, because of the above reasons Tumblr failed to hit its target.
Until 2015, Yahoo faced a total loss of $1.7 billion.
Verizon took over Tumblr in 2017 when it acquired Yahoo. Verizon Media sold Tumblr to Automattic in 2019 for an undisclosed amount. WordPress is own by Automattic so this deal makes a sense for chief executive Matt Mullenweg. It was a great discount against the $1.1 billion paid for Tumblr by Yahoo in 2013.
Who owns Tumblr?
Automattic Inc owns Tumblr. It’s a distributed company spread across 75 countries.
As per records on August 12, 2019, Tumblr hosts over 475 million blogs and less than 400 million monthly visitors.
Learnings – Why Yahoo-Tumblr Acquisition failed?
CEO Mayer wanted to transform Tumblr into an advertising cash cow. Yahoo never gave Tumblr time and support to innovate ad products. In addition to this, Mayer was not able to allocate time to discuss an action plan for Tumblr.
(*Cash cow means something that has a large market share, requires little investment and generate cash that can be used to invest in other business. It’s a term used in BCG matrix)
Yahoo’s chief revenue officer, Lisa Utzschneider headed the workforce formed by Tumblr’s sales team & Yahoo’s sales division. This triggered Lee Brown, former global head of brand partnerships for Tumblr to resign from her post.
The staff at Tumblr was not happy to work with Yahoo because of work culture differences. Mayer posting over-ambitious sales target of $100 million added more fuel to discontent and this resulted in the hike of attrition rate on Tumblr.
(*attrition – It refers to a loss of employee through resignation, retirement, termination, etc.)
Yahoo was not able to control ad flow on Tumblr and moreover didn’t care about user experience related to the platform. Moreover, it failed to control content safety.