Yahoo! and its board have approved a cash-only deal to purchase Tumblr for $1.1 billion. The bigger-than-Instagram deal is significant not only for the perplexing match it has created, but for the price paid to a company that, despite its massive audience, has barely made any money.
Tumblr only recently started inserting ads into its 100 million blogs, and though the company gets upwards of 20 billion pageviews every month, it took home just $15 million in revenue last year. That number, according to 26 year-old founder David Karp, is set to soar to $100 million this year, but Yahoo is paying far more than the already-high $800 million valuation considered earlier this year.
Marissa Mayer promises not to mess with a good thing, saying that not only will the company stay independent, but their roadmap will keep the same course. Obviously this could change at some point, but it looks like they’re not going to kill the golden goose.
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.
But this could turn out to be one of the best moves the revamped Yahoo has made in recent years. Since coming on board as CEO, former Google VP Marissa Mayer has instigated the purchase of several large brands, largely with the intention of shutting them down and integrating their employees. Popular services like Astrid, a cross-platform to-do tool, was acquired earlier this much and will be shut down by the end of August.
With Yahoo keeping Tumblr independent for now, it will still likely begin pushing some mainstream Yahoo users towards the blogging portal, as a means to drum up advertising revenue. Instagram, for instance, has remained independent but has been more tightly integrated with the Facebook feed. Yahoo is clearly pushing for the same type of cross-demographic alignment, albeit at a scale befitting the web, not just mobile.
Tumblr CEO, David Karp, has apparently committed to staying at Yahoo for four years post-acquisition and will oversee the company he has built from nothing, likely until he is satisfied it is in good hands, or regrets the ones he left it in.