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It's official: Yahoo has purchased popular blogging platform Tumblr for more than a billion dollars - $1.1bn to be exact.
The internet's latest nine-figure acquisition is probably one most industry observers wouldn't have predicted.
After all, despite that an ex-Googler, Marissa Mayer, is at Yahoo's helm, there were few prior indicators that she was looking to make a billion dollar purchase.
And if there had been, Tumblr, while incredibly popular, doesn't seem like the company that would have made it to the top of the list as Yahoo's track record with acquisitions of user generated content startups is not all that impressive.
From Geocities to Flickr, Yahoo has proven to be a master of reverse alchemy in the space, repeatedly finding ways to turn gold to lead.
Time will tell if Yahoo's Tumblr deal eventually produces a similarly disappointing fate, but in the meantime, advertisers might want to take note because the acquisition says a lot about how Yahoo views them.
To start, it pays to understand what Tumblr is and isn't. What it is: a hugely popular blogging platform with a young, hip audience. What it isn't: a profitable blogging platform with an audience craving ads.
But ads are just what Yahoo's Mayer has in store. While promising "not to screw up" what the Tumblr team has created, on a conference call discussing the acquisition, Mayer made it clear that Yahoo already has definite ideas for monetizing a service that reportedly generated just $13m in revenue last year.
"Tumblr already does some advertising, though minimal, in [its dashboard] feed. We would like to look at them and understand how we could introduce ads — in a very light ad load — where the impact is really created, because the ads really fit the users’ expectations and follow the form and function of the dashboard," she told listeners.
Also on the table: running ads for bloggers who want to monetize their Tumblr blogs. If there are any.
While some suggest that Tumblr could become Yahoo's YouTube, there are some glaring differences. YouTube founders Steve Chen and Chad Hurley perfectly timed the explosion of online video, and helped propel demand for it to new heights with a great product.
And while YouTube's financial viability was hardly assured when Google paid nine figures for it, YouTube was just two years old at the time and there were few indications that Chen and Hurley were opposed to monetization.
Tumblr, on the other hand, is just one of numerous popular blogging platforms, and has been around for more than six years. To boot, it sports a quirky audience and is run by a twenty-something who doesn't like advertising.
Oh, and one more thing: it has lots of porn. According to one source, NSFW content makes up over 11% of the service's top domains and is the leading driver of referral traffic.
While Yahoo will almost certainly be able to address advertiser concerns about content that isn't brand safe, Yahoo's official announcement of Tumblr, written by Mayer, states, "The combination of Tumblr+Yahoo! could grow Yahoo!’s audience by 50% to more than a billion monthly visitors, and could grow traffic by approximately 20%".
Translation: forget the makeup of the audience and traffic, and all the dirty and weird content that attracts a non-negligible portion of that audience and traffic.
Tumblr could dramatically increase our audience and traffic figures! And herein lies the message for advertisers: it's all about numbers. Yahoo's numbers, of course. Bigger is better because, well, bigger looks better in a media kit, right?
Yahoo may be buying growth with Tumblr, but will advertisers actually benefit from that growth? In other words, will they gain access to higher quality ad inventory? Will they have new avenues for reaching consumers who might buy their wares? It wouldn't be fair to state that the answer is, unequivocally, 'no', but it wouldn't be realistic to state that the answer is likely to be 'yes' either.
With that in mind, advertisers should consider that Yahoo has effectively bet more than a billion dollars that advertisers won't care and will buy up the company's hip new ad inventory anyway.
That says a lot about how highly one of the web's biggest media sellers thinks about media buyers today. The question for advertisers: will they finally give Yahoo a reason to think differently about them?