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Summary:

Fans of Yahoo CEO Marissa Mayer say she shouldn’t be blamed for the company’s history of failed acquisitions — but there are plenty of other reasons to be skeptical about Yahoo’s $1.1-billion Tumblr deal.

As the dust begins to settle from one of the most significant acquisitions in web-land since the Facebook/Instagram deal, the warm glow of euphoria created by Yahoo’s $1.1-billion takeover of Tumblr has given way to the harsh reality of blending — or, more importantly, not blending — two vastly different companies and cultures. In a statement about the deal, Yahoo CEO Marissa Mayer promised not to “screw it up,” a comment undoubtedly aimed at the sensitive community of Tumblr fanatics. But is it even possible for Yahoo to keep this promise?

Even before the news was confirmed on Monday, critics with long memories were reminding anyone who would listen about Yahoo’s track record with acquisitions, which has some rather notorious bumps in it, including two major ones known as GeoCities and Flickr. Those two deals alone have made many question whether Yahoo will be able to do the right thing with Tumblr — and while it may be unfair to lay the blame for these at Marissa Mayer’s feet, there are plenty of reasons to be skeptical about the future of this latest acquisition.

GeoCities + Flickr: billions in missed opportunities

In 1999, Yahoo bought GeoCities for about $3.5 billion, which even at the time was an eye-popping amount. Although it was over a decade ago, which is eons in internet time, there are some broad similarities between what GeoCities was then and what Tumblr is now: both were distinctive and somewhat chaotic communities, focused on allowing individuals to create their own space. Yahoo did a number of things that arguably accelerated the demise of its high-priced acquisition, including trying to monetize it through hosting fees and cheesy banner ads.

The other stick that many anti-Yahoo types use when they want to beat the company up about its acquisition strategy is Flickr, the pioneering photo community that languished under Yahoo’s ownership until relatively recently. As many of its hard-core fans (including me) have argued in the past, Flickr was — or at least could have been — Instagram before Instagram.

There have been a number of post-mortems on what happened with Flickr, but in a nutshell Yahoo did almost everything wrong: the larger company took away or smothered much of the photo-sharing community’s most important features, prevented its employees from innovating or growing, and forced all kinds of integration between the two platforms that did nothing to benefit users — in fact, precisely the opposite. It was like the trifecta of failure, and a perfect example of why most large-scale acquisitions don’t work.

“All Yahoo cared about was the database its users had built and tagged. It didn’t care about the community that had created it or (more importantly) continuing to grow that community by introducing new features.”

Successful mergers are exceedingly rare

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It’s certainly reasonable to argue — as many of her fans in Silicon Valley have since the Tumblr deal was announced — that Marissa Mayer shouldn’t be held to account for these lapses, since she had nothing to do with them and the internet has changed a lot since then. Yahoo is also substantially more desperate than it used to be (if that’s possible), and that has arguably made Mayer more cautious about potential screw-ups.

But the bottom line is that just because Mayer is a new CEO doesn’t mean she or the company won’t screw Tumblr up somehow anyway — either deliberately or by accident. That’s because large companies like Yahoo have a way of destroying the value of the things they acquire even if they don’t mean to do so, especially when the thing they have acquired is a somewhat unique community with special characteristics, which Tumblr arguably is.

This is why successful large acquisitions of web communities or services are so rare — rare enough that almost everyone can only point to a single example: namely, Google buying YouTube (although Facebook’s acquisition of Instagram is looking like it may be another one). The question for Yahoo and Mayer is whether Tumblr can be kept as a distinct entity and yet still monetized, as YouTube has been, or whether the process of monetization will inevitably turn Tumblr into the latest example of a MySpace-style failure.

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Can Yahoo do what Google did with YouTube?

Former YouTube exec Hunter Walk took a look at what Google did right in the case of YouTube, and boiled it down to five factors, including keeping the product from getting too intertwined with the parent company and maintaining a separate physical identity. But to me the most important ones were:

Protect Tumblr from “helpful” Yahoos: This is where the accidental destruction of acquisitions often comes from — people who just want to help, but whose requests for features and other attempts at integration wound up almost “hugging us to death,” as Walk puts it. There is a powerful desire to get efficiencies out of acquisitions, but many of those attempts fail badly and ruin the thing they were trying to monetize or grow in the first place.

Stop short-term monetization that won’t scale: Walk talks about how YouTube managed to avoid the natural desire to build all sorts of easy-win monetization methods into the platform, and focused instead on longer-term approaches that were harder to sell in the early going but built more value. If Yahoo sees Tumblr as a way to bulk up its banner ad or other programs, it could wind up making the exact same mistake that YouTube was able to avoid.

In the end, much of the answer to the question about Yahoo screwing up Tumblr rests on Marissa Mayer, and her ability to stave off the desires of both the board of directors and the other senior managers who see Tumblr as either a distraction or a digital cow to be milked and then sent to the abattoir.

Post and thumbnail photos courtesy of Flickr / Stephen Brace and Getty Images / Chris Jackson and Pamuk Sekerli Tardis

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  1. I have to agree. I am quite wary about this transaction. Not only does Yahoo not have the best track record with these sorts of things but in general many popular sites have been ruined or just ignored by the larger entities that purchased them. It really all depends on what Yahoo hopes to get out of the deal and I hope tumblr has a long and strong live ahead of it

  2. Reblogged this on Chux The Marketeer and commented:
    Following on from my earlier post about the Yahoo/Tumblr deal, an interesting take on whether Yahoo will live up to the promise not ‘screwing up’ the popular blogging platform. (Via GigaOM)

  3. > This is why successful large acquisitions of web communities or services are so rare — rare enough that almost everyone can only point to a single example: namely, Google buying YouTube

    Wow! The tech blogs are finally declaring Google’s purchase of Youtube a success? I think I remember reading some tech blog expressing doubts about this as late as last year. Wouldn’t be surprised if it was on Gigaom.

  4. Maybe to refine the point a bit, although buying communities is challenging, buying tech is less so. Google has a very good track record of buying tech co’s from the small to large and borg-ing them to at least a decent degree of success. DoubleClick is a good example. Even Yahoo! purchasing Right Media was a smart move at the time and really got them into the programmatic game. Online communities are fickle by nature and its hard to separate out mismanagement from the herd mentality that drops the old model for the Pinterest of the day.

  5. They’re TOTALLY going to eff this up. Completely.. we’ll get nothing but ads in our phones as we scroll.. a ton of updates that won’t be worth two cents. It will horrible. HORRIBLE.. they’ll tell us what we can’t post.. what we CAN post.. it’s ridiculous. Shame on the owners of Tumblr for selling out. Completely. Yahoo’s track record is LOUSY. Tumblr is a family.. young adults bonding together over music, and problems with life. Let’s see how long it takes before that goes down the drain. Look what happened with Murdoch’s minions once they acquired myspace.. NOspace..

  6. HedonisteEgoiste Friday, July 19, 2013

    SPOILER ALERT! They lied.

  7. “which has some rather notorious bumps in it, including two major ones known as GeoCities and Flickr. Those two deals alone have made many question whether Yahoo will be able to do the right thing with Tumblr — and while it may be unfair to lay the blame for these at Marissa Mayer’s feet”

    It is absolutely fair to blame Mayer for what has happened since she took over. From a user’s point of view, Flickr has become a far less useful, far less pleasant place to be and to visit. Did you follow the feedback in the Help forum about the last redesign, which included forced usage of the bandwidth devouring mess that is “justified” view? Usually, feedback discussions turn into promotional events for Flickr, because the forum regulars create a hostile environment for any skeptics, with the company’s help, but this time such a flood of hate came in that the staff and the regulars couldn’t keep up. Over 20,000 responses in the first few hours, the overwhelming majority of them negative.

    Now, we would appear to have a bad old idea for redesign, one that even the fanboys openly hated a while back, resurfacing with only slight modification, and all of its worst features still in place. This was mentioned in a discussion that you can’t see at the moment, but maybe you will after 10 pm tonight.

    http://www.flickr.com/help/forum/en-us/72157634583648725/

    A few weeks ago, we were invited to “opt into” the new groups design, which most reassuringly came without the option to preview what we were “opting into”, first. I went to the forum, and found this discussion. The short form is that discussions will be hidden under a tab, along with the group’s description, fouling navigability for those linking into Flickr from their other pages. As a webring user, if this plan goes through, I’ll be forced to cut all links to Flickr, just to avoid having a number of my pages declared to be “one way” sites, and in this case, with good reason. Other people will have analogous problems. Great thing to do when one of the site’s recurring problems is the low rate of traffic relative to the amount of content stored, isn’t it? Force people to cut inbound links that have been sending Flickr traffic, just so that management can put out a press release about their bold new redesign.

    The staff at Flickr has discovered that there are a lot of blogs, not that I’m naming any, on which radical redesigns of social networks are greeted with puff pieces in which the praises of management are sung, without anybody looking into the experience that the users are having, which has generally been an increasingly bad one. That radically redesigning a site will make it better and more profitable seems to be an article of faith in some circles, and a foolish faith it is, where it is not self serving, fostered by writers who know that the more of these redesigns there are, the more easy to write puff pieces they’ll be able to post and paste advertising on. The faith is a foolish one, because all things being equal, change is bad when we’re talking about interfaces or presentation. Change means lost labor as people have to learn what they formerly knew how to do all over again, and try to find where everything is. What needs to be fresh on a site is not the design, but the content.

    But writing about content would take thought and time and work, and so we’ll continue to see calls for the fixing of that which was never broken, until the last exasperated user gives up on the social networks, and certain bloggers find that they’ve used up the source of their content, by encouraging the industry they’ve been writing about to behave in the self-destructive manner it has. Then, not only will they have to rethink the choices they’ve made as writers, far worse, they might have to start working for a living, G-d forbid.

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