Any thoughts on this? $1.1bn seems like a lot, but maybe I just don't understand the value.
Yahoo says its $1.1bn (£723m; 857m euros) purchase of blogging platform Tumblr will boost its revenue as soon as 2014.
http://money.cnn.com/2013/05/19/technology/yahoo-tumblr/index.html?hpt=…
it looks like tumblr's main revenue source is just selling user information to advertisers? guessing this is a mainly a bolt-on acquisition to help their mobile front, right?
Bottom right of: http://rcs.seerinteractive.com/money/
Ads, subscribers, lead generation/affiliates, selling data, freemium, and royalties. And apparently not profitable... so maybe this is a marketing thing, get Yahoo's name out there more? I mean, that is the main purpose of Tumblr...
ya. they're aren't profitable if you look at it purely as an investment. the only way this even remotely makes sense is if this is a corporate strategy play looking for synergies/a cheaper way to break into mobile than building their own capacities.
Step in the right direction. Is it just me or are these tech acquisitions usually overvalued as a way to reward the creators for their years in the trenches?
Regardless, Marissa Mayer is proving Tina Fey right.
qatalyst warming up before the summer once more
myspace/fox the bi-polar children and attention whoring girls who provide all of tumblr's content will hop to something new as soon as yahoo makes any material changes to the site don't see them being able to monetize this successfully quickly enough before something else pops up
So what was the Price/Moody-15-yearold-girl multiple for the deal?
It's something referred to in the industry as an "acqui-hire".
Yea, I get that part of it. I just don't get it. Like, all of it. Together. Just another bubble to blow up
If I was in that position, Id just offer 5 million dollars a year to the 100 best programmers in the world, and let them go to work doing whatever the hell they wanted.
This acquisition can be summed up thusly:
Yahoo ceo wanting to look like shes dynamic and visionary Trying to seem like they arent gonna stagnate/get outdated by newer forms of social media Having too much debt/cash available for their own damn good
I disagree. An acqui-hire is typically a much smaller deal, where a company like Yahoo brings on a strong development team, typically kills off their existing project(s) and then has the team work on new products internally under the new ownership. Summly is a much better example of a recent Yahoo acqui-hire, and that was ~$30 million.
The Tumblr deal was more to do with acquiring one of the top 10 visited websites, with a huge amount of unique visitors and page views, particularly in the mobile space. As Yahoo so eloquently stated, they have no plans to "screw it up", and Tumblr will continue to operate separately under the former management team.
This is far more in line with the Facebook/Instagram deal, which was to do with expanding FB's mobile presence, user base, all while keeping it largely unaltered from the pre-acq product and under the former management's control with acquirer oversight/guidance.
Per the Dealbook article (http://dealbook.nytimes.com/2013/05/20/tumblr-deal-was-a-private-party-…):
"Ms. Mayer said the Tumblr purchase was “obviously an exception” to her strategy of buying smaller start-ups for their engineering talent. But she compared the acquisition to Yahoo’s takeover of Overture, which overhauled the company’s ad services. “Usually, when you do an acquisition of this scale, it becomes a core part of strategy,” she said. “The hope here is that this significantly contributes to our growth story.”"
This seems crazy to me. $1B for a company that's not making money? So their intangible assets are worth >$1B to Yahoo? This baffles me.
Also, what's Yahoo's thought on now being one of the largest porn pirate out there? I've never used tumblr, but I believe that it's basically teenage girls posting selfies and dudes posting porn. If they take a negative stance on any of that they may lose the small value tumblr actually has.
This is exactly where I'm at. I tried breaking it down and I got two value-adds:
1) Tumblr's CEO 2) Tumblr's audience
Maybe trying to convert the 100 million Tumblr users to Yahoo! users is worth the money?
I haven't followed this yahoo parade all that much, but it seems to me that the search engine of yester-decade is going to do everything in its power to remain in the news and somewhat relevant as the splash of a company hiring a cute CEO fades. I can definitely see how acquisitions like this fit that goal pretty well.
...comes off as a bit cynical, but yea
[quote]Tumblr made $13 million in revenue in 2012 and hopes to make $100 million in 2013. Tumblr reportedly spent $25 million to fund operations in 2012
http://en.wikipedia.org/wiki/Tumblr[/quote]
Nearly 1000% growth in a year seems unlikely. I also don't understand how this fits yahoo's corporate strategy. It just reaks of "Hey guys we're cool too!" try hardess.
I'll just leave this over here:
http://www.theonion.com/articles/yahoo-back-on-top-after-purchasing-mil…
They expect it to increase Yahoo's traffic by a large margin (60%). I believe that is 11-14 startups purchased so far under Marissa Mayer. Typically the startups they have acquired have been cheap though, this one far exceeds the others. The Wordpress CEO is loving it as tons of Tumblr users have already jumped ship to the other platform.
Summly — Yahoo bought the London news-sharing service in March for $30 million. Launched in 2011 by Nick D'Aloisio when he was just 15 years old, Summly is being integrated with Yahoo's mobile service.
Go Poll Go Inc. — One of four startups Yahoo acquired in May, Palo Alto, Calif.-based Go Poll Go enables users to create polls and share them via Facebook Inc. (Nasdaq: FB) and Twitter Inc.
Jybe Inc. — The Menlo Park, Calif. mobile service founded by former Yahoo employees in 2011 and bought by Yahoo in March recommends books, movies and restaurants based on user preferences.
Loki Studios — Yahoo bought the mobile gaming startup Loki Studios, based in Palo Alto, in March. The Loki staff has been integrated with Yahoo’s mobile team.
MileWise — The New York-based provider of search engine services was acquired in May.
OnTheAir — Yahoo acquired San Francisco’s OnTheAir in December. The startup specializes in broadcasting video and split-screen communication. The team Yahoo attained through the deal is expected to help the company build applications to compete with Google.
Propeld — Yahoo picked up this Seattle company in February. Propeld develops an application called Alike, a location discovery service.
Stamped — Announced in October, the New York mobile application developer marked Mayer’s debut deal at Yahoo.
Snip.it — Yahoo kicked off 2013 with the acquisition of Snip.it, a San Francisco scrapbooking service.
Todoroo Inc. — Todoroo, based in San Francisco, develops management software and was acquired from TMT Investments plc in May.
Quattrone - only banker involved in the deal. Qatalyst crushinggg it
From the WSJ article:
"As to how Yahoo arrived at the $1.1 billion valuation of a site that generated $13 million in advertising last year, Mr. Goldman said it used "traditional financial metrics like…cash flows" and looked at similar transactions in the past—namely, Facebook Inc.'s FB -1.87% 2011 acquisition of Instagram for around $1 billion and Google's 2006 acquisition of YouTube for $1.65 billion. In both cases, the acquirers bought companies with little to no revenue.
Yahoo also looked at "comparable companies in terms of metrics related to monthly users," Mr. Goldman said in an interview.
Ms. Mayer said the site has 300 million active monthly users. Seen that way, Yahoo is paying around $3 per user, while Facebook paid around $30 per Instagram user.
Yahoo will pick up around 90 software engineers from Tumblr. Web companies often pay $1 million per engineer during a transaction.
Yahoo is paying a premium for the company. When Tumblr last raised money, in late 2011, the $85 million venture-capital investment it received valued the company at $800 million.
"You only do an acquisition of this size and scale if you find an exceptional company, which Tumblr is," Ms. Mayer said."
How can anyone look at $13MM profit and conclude that a company is worth >$1B? If they are gaining 90 engineers, that still would not close the gap. Also, if they are using comparables such as youtube or instagram, that would presume that those comps are not overvalued. Similar to the housing market bubble, at some point, if big tech companies decide to stop buying startups for ludicrous payouts, wouldn't the valuation of said startups fall through the floor?
I also think we are overestimating the rational thought process and analytical abilities of a 13 year old Tumblr blogger. I don't think ALL of them are going to jump ship to protest a corporate acquisition of their favorite location to post selfies. My guess is that a lot of them wouldn't even notice the changes (they're too preoccupied with those zits they just got on their faces).
Or maybe I'm just jealous that I didn't turn a simple idea into a cool website.
I think I'll go mope about it in my LiveJournal.
Haha, value? Does that even exist in the tech industry? Facebook bought Instagram, which has less revenue than my 9 year old brother selling lemonade on the street. Yahoo bought Tumblr for a similar reason. From the Journal article below,
If anything (as has been said above), it's for the audience and for the "rapt attention of fast-growing communities of users" on a social media platform - in this case Tumblr.
http://online.wsj.com/article/SB100014241278873247870045784931307892351…
My 2 cents: Marissa Mayer has an agency problem, wants to do what Zuckerburg did with Instagram, while boosting her own CV.
The $13MM was in top line revenue, not net profit. From my understanding.
Google finance shows that yahoo's balance sheet has $2,667.78 in cash/equivs and another $1,516.17 in short term investments.
What the fuck are they thinking throwing around nearly $1.1B of their cash reserve (41% of total cash on balance sheet)? why not do part stock/cash like FB did for instagram and offer earn-outs based off of future performance metrics....?
Am i missing something here?
*note- cash and ST investment figures above are in millions.
Over valued imo and highly possibly due to relative valutation techniques (no coincidence that instagram was valued at 1b)
While I don't agree with the $1.1bn valuation, I think it fits into the context of Mayer's overall strategy to 'googlefy' Yahoo by a) moving Yahoo further up the supply chain for data/content, b) creating an incubation pond for early stage tech companies and c) providing a legitimate entry point into the social networking space.
When you're a sinking ship, sometimes you've got to take big risks for smaller rewards. I'm sure her thought process revolved around trying to get a large chunk of Tumblr's user base.
Let's face it, most people don't need to use Yahoo for anything in today's age; Google offers everything Yahoo does, and many people are now mentally programmed to type "Google.com" whenever they are in need of something on the web. Yahoo needs to do something to drive an increase in the number of users, and this is one of their strategies for that (which may be overvalued albeit).
To me, I think this is a bold move, but a good move. Although I can't comment on the valuation (I don't actually know enough to understand how they get these numbers), I can say that Yahoo has gotten my attention. I've never been a Yahoo user, I've been more involved with Google and Facebook. Recently though, I've been starting to look at their products and offerings.
The first thing that I like about Yahoo is Marissa Mayer. I think she has great vision and a strong resolve. She can make the tough and unpopular decisions to see her vision through (ie: calling out al the work at home employees).
The second aspect that got my attention is the topic of this thread, and the purchase of Tumblr. I'm a user of that product and enjoy the platform; it's simple, elegant and does what I want it to do well. This acquisition suggets that these are the types of product Yahoo wants to build, and that's something I can get behind.
Finally, the third component that is making me look at Yahoo is the recent overhaul of Flickr. The re-design is beautiful and the 1 terabyte of free storage space is unprecedented. Very impressed.
Overall it looks like Yahoo is focusing on delivering great products while attempting to exceed customers expectations and has found the right leadership to make that change happen. I look forward to seeing where the company will be at this time next year.
Is there a reason you structured your post like a middle school writing assessment?
I found a new word that makes me cringe: selfies.
/barf
1) Clearly people in this thread do not understand tech. Look at instagram's growth since it was acquired. Projection amplified by synergies that cannot be modeled in the basic valuation growth rates.
2) Not to be offensive, but the use of "acqui-hire" simply highlights that people on this thread don't even know proper definitions.
3) This site is CLEARLY not the target demographic so it's easy to bash. Tumblr's re-blogging cornerstone functionality has ridiculously changed the blogging paradigm.
4) read this because i'm too lazy to point out everything great about this move - http://seekingalpha.com/article/1449211-could-tumblr-be-the-next-instag…
5) the fact that people have said stuff in this thread about "trying to stay cool" and "increasing MM's CV" reflect a thread devoid of any intelligence and filled with ignorance unexpected on WSO. Yes, you really spend $1 billion for reasons like this. Jeez.
9/10 acquisitions do not realize additional value for the acquiring company, and synergies are BS.
Very possible. However, Tumblr has ~175 employees, so 5m/employee seems a bit high. Even if you were to give a 30x p/e to tumblr, thats still over 3m/employee. Seems significant, but I dont know tech for shit.
Computer literate, social media hyped 18-30 year olds are the target demo, no? I do agree though that I havent seen many tumblr references on wso though, so maybe not.
As I mentioned, Im not particularly tech literate, but that article mentions a couple of points.
Point 1 & 2 - it allows for exposure to the mobile area. I dont see how this is particularly relevant given that its revs still are just so low. Ive heard a lot of negative things about facebooks mobile ad revenue, so I could definitely use a more educated perspective on this.
Point 3 - What sorts of figures are there re: additional growth from the appeal to the younger market?
I actually really like tumblr's founders idea about 'story-telling advertising.' I think advertising should be a lot less intrusive and more integrated into the user experience. Like how businesses pay ad fees in order to be listed more prominently on Google Maps when you look for restaurants near you.
Current advertising business could really use a revamp... Only issue is that Tumblr might have the right idea, but they're not getting any serious traction in terms of $$$ so they're obviously doing something wrong. Maybe Yahoo can change that? (Although seeing Yahoo's 'progress' in the past year in terms of revenue generation makes me doubt that...)
Tumblr has like 50 billion page views a month. W nearly zero ads till a few months ago. They did $12m or $13M in revenue last year.
But Yahoo has ad clients. And Yahoo just increased its page views OVERNIGHT by 50%.
Expect the ad cash spigot to get turn on the day the deal closes.
Only time will tell, but I agree with Chris-Matteo, the potential synergies may be underestimated by masses in the long run
Tumblr acquired by YHOO. Good idea? (Originally Posted: 05/20/2013)
Hi ya'll,
NYT yesterday posted an article regarding YHOO's acquisition of Tumblr. For those of you who haven't read the article, here's the link: http://www.nytimes.com/2013/05/20/technology/yahoo-to-buy-tumblr-for-1-….
IMHO, Marissa Mayer made the right move in acquiring this widely recognized social networking site. I thought about what makes social networking attractive to people, and I am sure there is a slew of reasons for this but for me personally, it is a great medium through which I can express myself as an individual, sharing with your friends and family the places I have been to, what my thoughts are on certain issues, what I like, how I currently feel, etc. We live in a society where individualism is highly valued, and social media is a great tool that enables us to be "someone." While Facebook integrates said features really well, I feel like Tumblr has its own distinct features that perhaps complement and enhance our existing social networking experience. From my limited experience with Tumblr, the content is mostly comprised of pictures and videos, which can be viewed without much strain on your brain, but these forms of media definitely influence you and others in their own ways. Typically, people reblog and share the content and leave no comments. Unlike FB, it is rather silent but still fulfills your desire to express yourself without revealing your identity (generally). As a viewer, there have been several occasions where I got sucked into and lost in the content, and I am certain I'm not the only one. I can always find content that relates to my interests, whether its finance, hilarious txts, cooking recipe among 100+ million blogs.
YHOO needed a boost to regain investor confidence.Let's think about why we go to YHOO. Do a lot of ppl use YHOO as a search engine? I think not. I know I get the best result from GOOG and won't waste time performing my search somewhere else. According to a recent report, YHOO has about 20% mkt share, whereas GOOG has 60%+. Then, why does one go to YHOO. If anything, it would be its content. It pulls some good content from different sources and mostly importantly their ads don't annoy the hell out of me and are rather subtle. So having established this, the addition of Tumblr, which is a content-based social networking medium, seems like an appropriate move given YHOO's strategic position and the market trend.
YHOO did pay $1.1 billion for this acquisition, which by a relatively small margin tops the purchase price paid for Instagram. It would be interesting to see how YHOO integrates and monetizes this new asset.
Interested to hear your thoughts. Enjoy your week!
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