News broke over the weekend that Yahoo! has agreed to buy microblogging site Tumblr for an estimated $1.1 billion. Responses to the news have been, to say the least, negative: Mashable has a list of user reactions on Twitter and Tumblr that range from shocked and angry to outrageous and silly. The general consensus from various corners of social media is that the deal is a bad one.
And there’s reason to believe this acquisition could harm both Yahoo! and Tumblr. There’s fear that with just $13 million in revenue, Tumblr’s high price is wildly inflated; there’s the suspicion that, like other startups absorbed by Yahoo!, Tumblr could die of neglect; and there’s the near certainty that Yahoo! will stifle the freedom of Tumblr users to post whatever they like (for better or worse). Tumblr’s new parent company could give the struggling startup a boost, though; and Yahoo! could benefit from an infusion of users. If done right, this could be a win-win.
Yahoo!’s booster shot
Yahoo!’s reported purchase of Tumblr echoes Facebook’s recent acquisition of Instagram for $715 million; and while that deal has yet to realize revenue for Instagram, both companies appear to be benefiting from the partnership. The last few years haven’t been great for Yahoo!, but things appear to be looking up: new CEO Marissa Mayer is proving a capable leader, and the company has just extended its revenue guarantee with Microsoft.
With Tumblr’s built-in user base, Yahoo! could get the user boost it needs to propel its comeback. Of course, there’s no guarantee that more users would mean more ad dollars, especially since Tumblr founder David Karp isn’t fond on advertising on Tumblr and the platform has only recently begun to realize revenue.
The heart of search: advertising
But Yahoo! is still a search engine company, and it’s still looking to win the game, no matter how unlikely that might seem right now. Integrating search into Tumblr is one way to give both users and brands the opportunity to reach out to new audiences, both with sponsored content (something Tumblr’s already experimented with) and other types of advertising. After recently axing its team of journalists, Tumblr needs a winning project—even if it means partnering with a larger company. If Yahoo! invests and the time and resources necessary, Tumblr could finally begin to attract the kind of traffic that could help them ease into growing revenue.
The Tumblr-Yahoo! partnership might be great for both companies, but social media users see it differently. In the quest for a social media platform that allows users to share quickly and communicate with millions at a time, users have had to tolerate the monetization of their favorite online hangouts. It’s hard for any business to keep the lights on if there’s no money coming in; but as ads creep into every social media news stream, permission marketing tactics are slowly giving way to interruption marketing. Both Yahoo! and Tumblr should proceed with caution: the promise of higher revenue could be broken if users abandon Tumblr, and Yahoo! could be stuck with an expensive white elephant.
Image credit: Bitshare