The Value of the Tumblr Acquisition

Marissa Mayer:

I’m delighted to announce that we’ve reached an agreement to acquire Tumblr! 
We promise not to screw it up.  Tumblr is incredibly special and has a great thing going.  We will operate Tumblr independently.  David Karp will remain CEO.  The product roadmap, their team, their wit and irreverence will all remain the same as will their mission to empower creators to make their best work and get it in front of the audience they deserve.  Yahoo! will help Tumblr get even better, faster.

Since news seeped out regarding Yahoo's potential Tumblr acquisition last week, there's been a constant thread of discourse on Twitter. Onlookers have been repeatedly noting that, firstly, Tumblr is not a revenue driver and, secondly, this is a cash deal.

The implication of these tandem points is that Yahoo requires a business to increase its revenues, whilst also highlighting the lack of leverage Yahoo has in such negotiations.

Overlooking the former point for a moment, I think it's interesting to consider Yahoo's lack of potency and leverage. The company has depleted its social value and has become largely irrelevant for an enormous swath of Internet users over the past decade. The company has repeatedly purchased popular startups (e.g., Geocities, Flickr, etc.) and has always failed to capitalize on them.

Importantly, however, all of these failings were committed without Marissa Mayer at the helm.

Mayer was brought on board to rescue Yahoo from a virtually inescapable abyss of pointlessness. Obviously that's an extremely difficult task — one that will likely take several years to come to fruition — but I've found her stewardship of the company to be outrageously encouraging over the past ten months.

Looking over her time with Yahoo, we've already witnessed Mayer infuse much-needed life into Flickr, ban remote working, acquire Summly, and purchase Tumblr. Reviving Flickr and banning remote working are utterly steeped in pragmatic business, as Mayer requires the support of the Internet-faring users of Flickr and needed a convenient way to trim her workforce whilst also increasing worker activity. Summly and Tumblr, however, pose less obvious advantages.

Personally, I laughed when Summly was acquired. The company was run by a young man known for his immaturity, the technology was licensed from another firm, and the actual service was largely unused.

And yet, viewing the acquisition through post-Tumblr, I suddenly understand much of what Mayer intended.

Summly garnered headlines all around the world due to the CEO's age. Yahoo became a name associated with enabling and facilitating youthful innovation and entrepreneurship. And, today, with the Tumblr acquisition, that reputation is only further grounded.

Tumblr may not drive revenue (today), but it'll increase Yahoo's traffic by an enormous multiplier. Tumblr may not be directly rebranded as a Yahoo property, but it'll increase the brand-value and mindshare of Yahoo exponentially. And Tumblr may not be the blogging platform of choice for professionals, but it's veritably filled with young, taste-making people.

Mayer's stewardship may've been costly and some elements may've been controversial, but we've not discussed Yahoo this much in a decade. The company has not come to mind as a point of fascination or relevance in such a long time. And that's hugely significant.

Perhaps Yahoo's cash reserves are depleted, but we're now seriously discussing a Yahoo comeback. And if there's ever been a good cause for spending a cash reserve as a failing company, I suspect such acquisitions and business decisions would rank very highly, indeed.

Increasing revenue and value for shareholders is the primary goal of any CEO. Although Mayer has not yet done this in an obvious or direct manner, I genuinely believe she has set out the groundwork for a resurgent Yahoo for the next decade.

I cannot wait to see what Mayer does next. And that's utterly indicative of quite how successful she's been as CEO at Yahoo.