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Summary:

Yahoo wants to buy Tumblr. We hear Facebook might spoil the party. But the question is: is Tumblr the fountain of youth that Yahoo badly needs or will this be case of a pathetic old-middle aged guy hanging with youngsters trying to be hip.

Yahoo chief executive Marissa Mayer thinks that what Blogger did for Google, Tumblr could do for her aging Internet company — make it relevant and a major player on the modern web. And for that she is apparently willing to spend a billion dollars (or perhaps higher) in order to buy the New York-based social publishing and sharing platform.

The news of the pending deal was first reported by AllThingsD and later Adweek reported rumors of their deal as well. At least a couple of our own sources say that the talks are serious. We have also learned that the deal is being championed by CEO Mayer, who according to Kara Swisher, has met with the team from Tumblr. We have learned that Yahoo’s New York-based corporate development team is leading the process, though like all deals, talks could fall apart. (We have reached out to the respective parties for their comments, but so far we have not heard back from them. We are going to update the post to reflect their responses.)

Tumblr says it has nearly 108 million blogs, over 50 billion posts and it is said to have 117 million visitors a month according to comScore. Forbes.com reports that Tumblr made $13 million in 2012 and is looking to bring in about $100 million, thanks to its new advertising initiatives. The company also recently introduced mobile advertising. For Yahoo this could be a much needed foray into mobile advertising and also into pushing new native ad-formats that help diversify its ad business away from the usual web advertising.

Valley calls Karp

DavidKarp

David Karp, one of the co-founders and chief executive of Tumblr, has been seen around in Silicon Valley. Tumblr has been trying to raise a new round of funding, but it’s slower than expected revenue ramp has acted as a dampener for the fundraising efforts. Tumblr has raised a total of $125 million and is rumored to be valued at $800 million. Tumblr investors include Union Square Ventures, Spark Capital, Sequoia Capital and Greylock Ventures.

But Yahoo may not be alone in courting Tumblr. In November 2012, my colleague Mathew Ingram argued that Facebook and Tumblr should poke each other. Surprise surprise, it is something that is nagging Yahoo bigwigs.

Facebook in the mix?

ZuckKarp

We have heard that Yahoo is worried that Facebook could swoop in at the last minute and beat it to the buzzer. If the Instagram acquisition was any indication, then we shouldn’t doubt Zuckerberg’s salesmanship. Karp is said to have a close relationship with Facebook and was recently spotted at the Facebook Home launch. Facebook could use the much needed younger 18-to-24 year old demographic, something it (successfully) tried to acquire with Instagram. A Facebook spokesperson declined to comment.

One question is why wouldn’t Google want Tumblr? After all, it would mean young people on a social network that could feed into Google+ — sort of like how Blogger fed pages into Google. I am guessing given its ownership of Google+ and Blogger, Google might meet some resistance from the Department of Justice. Still, as our sources pointed out, Yahoo knows the challenges in the competitive landscape and is trying to move very fast. The speed would perhaps mean that the company could short circuit the due-diligence process and overlook Tumblr’s challenges with content of questionable provenance.

Money Talks

The good news for Tumblr and its backers: Mayer will soon be super flush with cash. According to a recent Yahoo 10-Q filing, the value of Yahoo’s stake in Alibaba has gone up substantially as Alibaba’s continues to grow its revenues at a healthy clip. Yahoo owns about 23 percent of Alibaba and the Chinese eCommerce company is likely to go public and could worth as much as $100 billion in its post-IPO avatar. Yahoo is expected to sell about half its stake in the Chinese company in the likely 2014 IPO. Wall Street currently values Alibaba at around $70 billion.

In the end the question that remains: is Tumblr the fountain of youth that Yahoo badly needs or will this be a case of a pathetic middle aged guy hanging with youngsters, trying to be hip. Either way, Tumblr founders and backers could laugh all the way to the bank.

PS: Read this teenager’s response to a question on Quora, “How do teenagers waste hours upon hours consuming Tumblr?”

  1. hahha, i dnt think facebook going to swoop it :p

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    1. Eunice Wong Friday, May 17, 2013

      Ok lets c. Time will tell.,

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  2. Big bucks

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    1. Yup seriously big bucks

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  3. entrepreneur@Heart Thursday, May 16, 2013

    Hi Om, I thought you hate Facebook and Zuckerburg.. ;)

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    1. Hate is such a strong word. And you don’t really know me :-)

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  4. If Yahoo takes tumblr then that means Tumblr will get closed in few months. They purchased snip.it last year and it was closed within month. Yahoo buys startups and products only to close them. That’s what I have noticed. So if tumblr wants to survive with huge community, anything but Yahoo should purchase.

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    1. Lol. But unlikely. In this case they have something Yahoo needs: traffic, audience and youth.

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      1. But as soon as yahoo buys and changes anything about tumblr, the people using it will leave. As long as yahoo doesn’t take away what tumblr is, they will get what they need. Any big change, though, and that traffic and youthful audience will leave.

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      2. MilkyChocoxD Saturday, May 18, 2013

        Yeah, but most of the youth on Tumblr hate Yahoo and they’re willing to desert Tumblr if it’s bought out.

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  5. i think marissa is doing a terrific job. i love every single thing she has done to yahoo that i’m aware of. integration with dropbox is great, newsfeed is great, summly integration was lightning fast. and they just got the rights to SNL! been looking for those dana carvey episodes for years to no avail. i think by now we should give her credit for being onto something as far as what she can do with tumblr. i mean, in this case it’s not even hard, just don’t screw it up.

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  6. I don’t know. Tumblr is fun, easy and is growing fast. But it’s also a little bit like Myspace once was — replaceble? Much more than for example Facebook which has managed to index the world’s population with real names and everything. WIth that said, I really hope it sticks, I got a tumblr myself and I really think it’s great. I have a lot of tumblr followers, but I don’t think any of them would miss me if I stopped posting. It would be really cool if David Karp and his team managed to build its own business in some way.

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    1. I really hope that tumblr sticks around as well…I’ve found it to be a better blogging platform than LiveJournal, Blogger, WordPress or even Dreamwidth now simply for the active community on there. I used blogging for personal entries, but what I liked about it was all the people I was able to find through ‘fandom’ based on my favorite TV shows, films, books, video games, etc.

      I noticed that fandom participation is most active on tumblr, and even more so than on LiveJournal or Dreamwidth now. It’s so easy to find like-minded people on tumblr and get caught up in all the latest news with them. I mean…hello? Ever heard of the “Mishacolypse” started by the Supernatural fandom on tumblr? Stuff like that is what makes tumblr so entertaining and great.

      Tumblr was where I found some really great people to chat with about these geeky sort of things. It’s where memes are born as well (“senpai noticed me!”) and what keeps the Internet hip and cool.

      Of course, there’s the hipsters, but hell, tumblr is for everything. It’s able to become something that the other blogging services have not. I found tumblr useful for creating an online art portfolio as well, as the way you can design your blog on there makes it so seamless and beautiful…hell, even better than using DeviantArt. Hence why there’s so many artists on there that have art/photography/fashion design blogs now.

      I also found tumblr great as a base of operations for some non-profit organizations. I am in one and have used tumblr as my primary blogging platform to get my members active and participate in community outreach. It’s really great, and the integration with facebook Pages makes it easier.

      In all honesty, I think facebook should buy tumblr instead of Yahoo if the service really is this deep in financial waters. I don’t want to see such a great product go away.

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  7. There is a whole load of porn on Tumblr. How will FB or Yahoo! handle publishing that content, not just helping people find it?

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  8. I can tell you one thing given the privacy violations of Facebook and Yahoo if either company acquires Tumblr I’ll drop Tumblr like a lead balloon. The two more intrusive nosey companies out there and their cozy relationship with financial support of the Democratic party doesn’t help either. Thanks for the heads up.

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  9. Really?
    Yahoo doesn’t need Tumblr. No one needs Tumblr, a site with revenues that are nearly nil.
    If Alibaba is truly generating these kind of revenues, then Yahoo needs more Alibabas.

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  10. I could see how tumblr could be integrated with flickr… There are synergies available there that are not available to Facebook.

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