Yahoo is spending $1.1 billion to acquire Tumblr:
Despite the breadth and diversity of life online, there are relatively few opportunities to make the kind of acquisitions that make the industry stop and take stock. Yahoo’s $1.1bn deal to buy Tumblr is one of those moments: a bold acquisition that says chief executive Marissa Meyer means business.
Comparisons to Yahoo’s 1999 $3.6bn acquisition of Geocities are too simplistic. In internet years, 1999 is more like two centuries ago and Yahoo is in a completely different place, led by a woman with all the zeal of a convert. Repeatedly passed over for promotion during her previous (another internet lifetime) 13 years at Google, she has an opportunity to do something impressive with Yahoo, which seemed in terminal decline. One venture capital executive told me that during the tenure of Carol Bartz, Mayer’s predecessor once removed, the investors were expecting Yahoo to ditch all but essential staff, focus on core revenue-building products and then rinse the company hard for maximum profit until it ran into the ground.
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Yahoo was easy to write off in the tech community because it lacks the cool factor and developer kudos of Facebook and Google. But Yahoo’s power has always been in its more mainstream (though ageing) user base and its powerful display advertising business. Herein lies the key to its Tumblr acquisition. Though the fit with this hipster lite-blogging, photo-heavy platform could seem a little awkward, it makes sense in the context of Yahoo’s ad strategy.
Tumblr founder David Karp has always said its advertising model is based on Twitter’s “the tweet is the ad” principle. That is, that being embedded in a customised, personal flow of information, being relevant to an influential and proactive community is the most valuable and meaningful way of presenting display advertising right now. That makes Tumblr, integrated with Yahoo’s enormous expertise in display advertising, a diverse and demographically important platform for Yahoo that is mobile-heavy and social-focused.