ScreenshotEveryone is reporting that Yahoo is in serious talks to buy Tumblr.
Tumblr is basically a Twitter for images (or, if you prefer, a dead-simple “blogging platform” that allows you to follow other users)–a digital “platform” that allows users to post and share content.
These talks between Yahoo and Twitter make sense.
Yahoo wants to become hip and cool again, and Tumblr is hip and cool. Tumblr is also huge and growing fast: It’s one of a small handful of successful social media giants that also includes Facebook, Twitter, Pinterest, and Instagram. Tumblr is a “platform,” which is in keeping with Yahoo’s new emphasis on being a content distributor rather than a content producer. Importantly, Tumblr is also affordable for Yahoo, which few other companies in this group are.
(Tumblr might be had for about $1 billion, folks are reporting. That’s in the range of what Yahoo could pay without significantly diluting its equity or blowing a big percentage of its cash. Pinterest, the second-lowest-priced company in this group, would probably command at least a couple of billion, and would therefore be signficantly more dilutive.)
To be sure, a Yahoo Tumblr acquisition would come with lots of questions–namely, how Yahoo would plan to “monetise” Tumblr. So far, Tumblr has had trouble generating really significant revenue, in part because of the company’s attitude toward advertising. So one key question would be whether Yahoo can generate enough revenue from Tumblr to make the purchase price worth it without compromising the service’s value to users.
But, from a high level, the talks make sense.
Alas, now that Tumblr is effectively “in play,” Yahoo is not likely to be the only one at the table.
In fact, one can reasonable assume that the reason everyone is reporting the Yahoo-Tumblr talks is that someone on the Tumblr side wanted to announce to the world that Tumblr was in play–and, thus, notify other interested parties that they might want to get their acts together and submit bids.
And there’s one other big player out there that could afford to pay a lot more for Tumblr than Yahoo can: Facebook.
These days, young, hip Internet users are quitting Facebook in favour of Instagram and… Tumblr.
So it would certainly make sense for Facebook to take a look at Tumblr.
Facebook, meanwhile, has deeper pockets than Yahoo.
Facebook has a $65 billlion market cap and $10 billion of cash.
Yahoo has a ~$30 billion market cap and only $3 billion of cash.
So if Facebook really, really wants Tumblr, it has the capacity to outbid Yahoo for it.
And Facebook also still has another advantage over Yahoo, which is that it’s considered cooler in the tech crowd. Yahoo’s new CEO, Marissa Mayer, has been tremendously successful at improving Yahoo’s reputation as a cool place to work. But tech folks, especially young tech folks, are very sensitive to whether they are perceived as cool. And Tumblr might conclude that it is just cooler to become a part of Facebook than it is to become a part of Yahoo.
(I work at Yahoo, and I think it’s very cool. But I think it’s cool, in part, because young tech folks don’t think it’s cool. That said, I’m so ancient that the cool tech kids don’t think I’m cool. And I suspect the Tumblr folks will be more concerned about whether their young friends think they’re cool than whether I think they’re cool. I do think the Tumblr folks are cool, though. They’ve built a great company!)
Anyway, as Silicon Valley writer Om Malik suggests, Facebook could indeed spoil this Yahoo Tumblr party. (Om, in fact, says he’s hearing that Facebook may do that.)
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