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.

How long will it take yahoo to ruin tumblr?—
Blake Hounshell (@blakehounshell) May 19, 2013

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

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.

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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Of course, as Om and others have already mentioned, there’s no guarantee this deal will actually be consummated: it could fall apart on valuation, as so many deals do — or Facebook could swoop in with a much higher offer and snatch Tumblr out of Yahoo’s clutches, the same way it did when it stole Instagram away from Twitter last year for close to $1 billion.

Update: According to the Wall Street Journal, the Yahoo board of directors has approved a $1.1-billion all-cash bid to acquire Tumblr.

It makes Yahoo look desperate — because it is

Even if the deal does get done, one of the risks for Mayer and Yahoo is that the company could look desperate by paying more than $1 billion for a site that had revenues of less than $15 million last year (although CEO David Karp has said that figure should hit $100 million this year). That’s an almost bubble-like multiple for a company, and there will likely be plenty of criticism from investors who believe that $1 billion could be better spent elsewhere — in other words, on businesses that would make Yahoo a better return.

But the painful fact is that Yahoo doesn’t just look desperate — in many ways it is desperate. Mayer has made some changes since she took over the ailing former web portal, including the acquisition of Summly and a number of other mobile-focused startups and services, but the company still needs to make some aggressive moves if it is going to jump-start any growth at all. And since Yahoo has about $4 billion in cash on hand, it can arguably afford to make a big bet.

Yahoo buying Tumblr makes sense. Tumblr is only big, cool, newish social platform that Yahoo can afford.—
Henry Blodget (@hblodget) May 17, 2013

For Yahoo, the addition of Tumblr would do a number of things: because of the size and profile of the deal, it would make a major statement about Mayer’s intention to do whatever it takes to revitalize the company, and it would also send a signal to Facebook and Google — and even Apple — that Yahoo is a potential force to be reckoned with when it comes to potential acquisitions. Is doing that worth $1 billion? That’s for Yahoo’s investors and board of directors to decide.

Just as important, it would inject some much-needed life and energy into the somewhat stale lineup of content that the company currently relies on, which caters more to the over-50 set than it does to anyone in the much-desired 18 to 25 demographic. More than any other network, Tumblr is the platform of choice for media-obsessed teens and 20-somethings, who spend massive amounts of time sharing photos and videos and animated GIFs on the site — an engine of potential value that Yahoo desperately needs.

Tumblr gets a massive exit

This doesn’t come without its own risks, of course: As a number of observers have noted, Tumblr’s content contains a large quantity of not only mature or arguably offensive content but outright pornography, which many argue is the source of its massive traffic numbers. How Yahoo (or Facebook for that matter) would deal with this kind of content remains to be seen.

3 q's for Yahoo: 1) Can you convert Tumblr users to Yahoo products? 2) Can you monetize Tumblr PVs? 3) What to do w/ all that Tumblr porn?—
Mark Zohar (@markzohar) May 18, 2013

For Tumblr, meanwhile, being acquired would solve a number of problems — the main one being that the company has gone well beyond the “we’re a startup so we don’t really have to make money” stage, and is facing increasing pressure from the investors who have given CEO David Karp more than $125 million in venture financing, an investment that values the company at about $800 million. Accepting a giant check from Yahoo would take care of that problem in one fell swoop, especially if it was all in cash.

With a major company like Yahoo as a partner, Tumblr could connect its massive audience of users to the firehose of ads and other monetization methods the giant web portal has, and potentially generate much more revenue than it could have by itself. The only lingering question at that point is whether Tumblr fans decide that Yahoo is poisoning the well of social content and community on the site, and decide to flee for greener pastures. In other words, does Yahoo make Tumblr into YouTube — a successful standalone network that can grow and prosper on its own — or does it become MySpace?

The only scenario where a Yahoo-Tumblr combo works is if Yahoo keeps Tumblr separate in the same way Google managed YouTube.—
Mark Birch (@marksbirch) May 18, 2013

Post and thumbnail photos courtesy of Shutterstock / ollyy and Albert Chau

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YouTube Senior UX Designer Josh Sassoon and his colleague Tom Broxton, who leads the Monetization UX team at YouTube, gave a sneak peek at the multi-screen design principles that will guide YouTube’s future looks during a session at Google’s I/O developer conference in San Francisco Thursday. The big theme was eerily familiar to anyone following our I/O coverage this week: YouTube wants to unify its experience across all screens, the duo explained, while paying attention to the specific use cases for each and every screen.

The duo showed off some design concepts during their presentation, with some featuring the same kind of tile-based design that has been dominating Google’s mobile design language lately brought to the desktop, and at least one playing with the same kind of multi-column design that Google just launched with Google+ for a possible redesign of YouTube’s homepage.

Many of these things were just presented as examples of the design process, which is very data-driven and based on both A/B testing and traditional user research. Fun fact: YouTube has been passing out paper assignment booklets to select users, asking them to track when in the day they’re accessing the site and with which devices.

However, Sassoon and Broxton also shared a few slides of what they called sneak peeks — not necessarily final versions of what YouTube will look like, but definitely explorations that hint at where things are going:

Worth noting in this shot is that YouTube is trying to unify the subscribe button across platforms — which makes a lot of sense, given how much of a focus the site has put on channels.

Also, take a look at how gorgeous this TV UI looks. And once again, there’s a theme of unification across its desktop, tablet, Android, iPhone and ultimately TV platforms.

As for the current redesign: YouTube first introduced the newly designed channel page, dubbed One Channel, in February, and the site said that it has seen a 20 percent growth in page views on participating channels. All in all, more than 100 million channels have already opted in to the new design, according to a post on the YouTube Creators blog.

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YouTube first introduced live streaming two years ago with select partners, and has since gradually expanded the number of approved live streamers by opening up the service to nonprofits and other partners. The site has also been offering any Google+ user to live stream so-called Hangouts on Air, which are essentially Hangouts that can be watched by an unlimited number of users.

YouTube has been working behind the scenes for some time to make live streaming on its service more robust and attractive. It added the ability for select publishers to charge for live streams a year ago, and rolled out a completely revamped live streaming platform earlier this year.

YouTube’s announcement could put pressure on dedicated live streaming services like Ustream, Livestream or Justin.tv. All of these companies at some point directly competed with each other for the live streaming masses, but most have since tried to differentiate themselves with their own take on live video: Justin spun out Twitch.tv to double down on video game live streams, and Livestream has been moving away from pre-roll advertising towards native monetization.

Image courtesy of Flickr user kevindooley

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Take a look back at our live coverage of Google’s flagship conference, which started at 9am PT Wednesday. We’re not expecting as major a news event as we have in past years, but there will be no shortage of updates to the company’s plans for Android, Chrome, YouTube, and its cloud-computing services. We’ll have a full contingent of GigaOM reporters at the show bringing you updates both here and throughout the course of the day, so stay tuned.

So far, Google has announced:

• 900 million Android activations
• Three new Google Maps location APIs
• Synced Google Cloud Messaging accounts, which will let you sync notifications across devices.
• New Google Play Game Services features that can do multiplayer gaming through Google+
• Android Studio, a new development environment for Android app developers.
• A new design for the Google Play app store that highlights tablet apps.
• Google Play Music All Access, a subscription music service.
• A new educational initiative involving Android tablets and apps for education.
• Sweeping updates to Google+, including a new stream design.
• Conversational search within Chrome.
• Big changes to Google Maps.

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While it might not feature anything as crazy as last year’s Google Glass-streamed skydive over downtown San Francisco, if you love (or love to hate) Google’s world, here’s what you can expect this week. We’ll update this post as new stories are posted.

Day 3:

• The GigaOM Show: Google I/O themes and takeways that affect you
• The future, according to Google
• Some of the best articles you need to read about Google I/O
• A sneak peek at YouTube’s future as it rolls out new channel design for everyone
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Day 2:

• So Google Compute Engine is out, your move Amazon
• Google, NASA quantum computing project could bring stronger machine learning to the masses
• SMS integration coming to Google Hangouts. Will Google Voice follow?
• Google CEO Larry Page: Do as I say, not as I do
• How Google Music wants to take on Spotify, Rdio and Rhapsody
• Google jumpstarts Glass development with apps form Twitter, Facebook and Evernote
• What do good shoes, Google+ and Facebook have in common?
• How Google cleverly improved Android without releasing Android 4.3 at Google I/O
• The road less traveled: How Google does Streetview for the world’s oceans
• Why Google thinks the GPU is the engine for the web of the future

Day 1:

• Live blog: Google I/O 2013 showcases Android, Chrome, YouTube and more
• Google I/O statshot: 900 million Android devices activated
• Google Apps set for a communication upgrade with deeper Google+ integration
• Google officially launches its music subscription service at Google I/O
• Google turns up location data usage on Android apps
• What Google was thinking when redesigning the new Google+
• Prepaid gives Google a huge Android boost (and Apple has noticed)
• Eight years later, Google reinvents its Maps for a data rich web
• Coming to a school near you: Google launches Android app store for education
• How Google is setting the new search standard with voice and knowledge graph
• Google TV will receive Android 4.2.2 update as well as latest version of Chrome
• And, bam! Here’s Google Compute Engine
• Google’s growing cloud just got a NoSQL database
• Here’s the real theme of Google I/O: Service unification between Chrome and Android
• Why the snap of a photo changed my mind about Google Glass
• Google gains appeal for cloud services, but there’s this company called Amazon

Pre-show expectations:

• Why the time has come for Android @Home to finally make a splash
• Google I/O: Arming for the battle of the public cloud stars
• What to expect for Chrome and Android at Google I/O 2013
• Where to watch Google I/O 2013 live online
• Reports: Google will launch music subscription service at I/O

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Despite the love people have for email, Twitter and even Facebook, the real star of the web in terms of sheer traffic is video. And not only is all this real-time video streaming possibly rotting our brains, congesting our broadband networks and threatening our pay TV businesses, it’s driving wholesale changes in how we pay for broadband and the future of television.

A great illustration of these changes comes from Sandvine’s Global Internet Phenomena Report: 1H 2013. Sandvine provides deep packet inspection and networking management tools to wireless and wireline ISPs, which is how it gets some of its data. While, many people already knew that Netflix traffic comprises about a third of the web traffic in the U.S., they might not know that YouTube is gaining rapidly with 17.11 percent of web traffic downloaded on wireline networks, up from 13.8 percent a year ago.

Video makes bandwidth hogs of us all

Few people are immune to the siren song of cat videos or Arrested Development. In fact, it’s changing the profile of what broadband usage looks like to the point where it’s normal to be a bandwidth hog. According to the Sandvine report in North America, the top 1 percent of subscribers who make the heaviest use of the network’s downstream resources account for 10.1 percent of downstream traffic.

However, those top 1 percent of users don’t look too much different from the top 30 percent. At the bottom, the network’s lightest 50 percent of users account for only 6.4 percent of total monthly traffic. In fact it’s those laggards at the bottom we should be worried about. Did they somehow miss Gangnam Style?

The average and median usage on both wireline and wireless networks in North America is on the rise. On wireline networks mean usage was 44.7 GB, a 39 percent year-over-year increase from 32.1 GB. Over the same period, median monthly usage increased at an even by 56.5 percent, jumping from 10.3 GB to 18.2 GB. On mobile networks mean monthly usage increased by 25 percent from 312.8 MB to 390.1 MB. Yet, median usage more than doubled from 25.5MB to 58.7 MB over the past year, driven in part by more people buying smartphones.

And mobile is even bigger than these numbers make it look like (or something like that). One out of every five bits — or 20 percent of the traffic on wireline network is generated by a smartphone or a tablet. And as Wi-Fi expands and is easier to connect too, that number should continue to increase.

Yes, video traffic will always be big, because videos are big

Before people accuse me of being unfair, let me note that sending video is one of the most data heavy options around. A two-hour HD movie file can contain 4GB of data or more, while a book that might also take two hours to read would top out at several megabytes.

The sheer volume of data is one reason video strikes fear into the hearts of both wireless and wireline network operators, while the loss of revenue from pay TV subscriptions keeps wireline providers up at night. Unfortunately for those implementing usage-based billing plans perhaps in hopes of influencing subscribers to keep their pay TV subscriptions, Sandvine shows that real-time entertainment usage goes up on networks with usage-based billing. In fact, the only thing reduced appears to be file-sharing traffic.

The rest of the report is chock full of great data such as this tidbit that confirms North America’s love of Apple products:

So what single home roaming device consumes the most Real-Time Entertainment traffic at over 10percent? It’s the iPad. In fact, Apple devices as a whole play a large role in the consumption of Real-Time Entertainment. If you add up all Apple manufactured devices (which includes iPads, iPhones, iPods, AppleTVs, and Mac computers), they consume over 35% of all streaming audio and video on North America fixed access networks.

There’s also some good data from Europe that shows that the lowered availability of over the top options like Netflix or the BBC’s video player cause the amount of real-time streaming traffic to drop. Additionally the report shows that in Europe file sharing is higher than in North America, something the report’s authors attribute to a lack of access to certain popular content because of geo-blocking.

But taken in its 40-page entirety, the data and case studies show how our love of video is causing both wireline and wireless ISPs to get creative to boost revenue and meet the challenges posed by the demand for video. Just like we said it would.

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There may admittedly not be an easy answer to the above question, given the nature of YouTube’s subscription model. The site isn’t charging users for an all-access package, but isinstead turning individual channels into paid subscriptions. Some of them will likely fail, while others may well succeed. But you can learn some lessons from YouTube’s past to get a sense of how this paid future will play out.

To succeed on YouTube, you need to understand YouTube

It’s especially worth looking at YouTube’s other ambitious monetization plan — the site’s premium channels, which received sizeable advances from Google to produce higher-quality content in late 2011. YouTube’s initial lineup included a lot of A-list celebrities and big-name media brands. Madonna, Tony Hawk, Ashton Kutcher, Reuters and Lionsgate all were part of the initial lineup. They were joined by genuine YouTube-born celebrities like Phil DeFranco and Cenk Uygur, who launched new channels with additional content as part of the content push.

Guess who succeeded? Here’s a hint: DeFranco’s SourceFed channel clocked more than 345 million views to date. Reuters TV, on the other hand, only got 11 million views. Many of the outside media brands simply didn’t know how to talk to YouTube’s audience, and as a result failed to get enough traction on the platform. That’s why quite a few of them didn’t make the cut to get additional funding when YouTube renewed its commitment in November. Only 30 to 40 percent of the original channel lineup was part of a second round.

That’s a lesson that may be true for paid subscriptions on YouTube as well. Brands and personalities who already have a dedicated fan base on the platform will have little trouble asking them for $2 or $3 a month, provided that they come up with an interesting value proposition. Outside brands that want to use YouTube as an additional platform to sell their content may have a much harder time — which is why it was so surprising that the first slate of subscription channels largely consists of outsiders.

Sure, there’s a market for some of them. But in many cases, that market may not be on YouTube. A sales pitch like “discovering movies you’ve never heard of is part of the fun,” as used by the $5-a-month channel BigStar Movies, may just not fly with YouTube users when the site also hosts tons of movies we’ve never heard of for free.

People do pay for niche content, if it’s done right

The contrarian argument to this is that there is a proven market for niche content, and there’s no reason that this couldn’t extend to YouTube. In fact, the site already has a subscription success story: Long before YouTube announced its subscription plans, it started offering a subscription package for Indian cricket games in cooperation with Willow.tv.

It’s part of Willow’s online subscription service, which is available on a variety of platforms, with Google doing the billing for users subscribing on YouTube. And Willow.tv seems to be doing really well, because it delivers content unavailable elsewhere.

Other niche players have shown that people are willing to open their wallets as well: Two months ago, Crunchyroll announced that it now has 200,000 paying subscribers for its Anime-focused video service. There’s no reason this kind of content wouldn’t work on YouTube as well.

And people may not just want to pay because of scarcity: Sesame Street videos are widely available online, including on PBS Kids, Sesamestreet.org, YouTube, Netflix and Hulu. But especially on YouTube, it’s often just one click from a cute Elmo video to one of someone setting an Elmo doll on fire. Giving parents an option to access full-length-episodes, and keeping kids glued to the official Sesame Workshop channel, may get quite a few of them to pay a few bucks a month.

It’s not whether YouTube succeeds, but who about who succeeds on YouTube

In a way, if YouTube can succeed with its subscriptions seems almost to be the wrong question to ask. It’s more about who can succeed with subscriptions on YouTube – and I suspect that we are going to see many failures and quite a few success stories.

And if you ask me, my money is on Cenk and Elmo.

Image courtesy of Flickr user  sushi♥ina.

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“Every channel has a 14-day free trial, and many offer discounted yearly rates. For example, Sesame Street will be offering full episodes on their paid channel when it launches. And UFC fans can see classic fights, like a full version of their first event from UFC’s new channel. You might run into more of these channels across YouTube. Once you subscribe from a computer, you’ll be able to watch paid channels on your computer, phone, tablet and TV, and soon you’ll be able to subscribe to them from more devices.”

Partners include The Young Turks, UFC, Jim Henson Company, Mark Cuban’s HDNet and the Sesame Workshop. Not all channels are live yet, a first list of 53 initial launch partners can be found here.

Some of the new partners should come as no surprise to paidContent readers: We reported earlier this week that YouTube’s employees have been testing paid channels for the Sesame Workshop, Baby First TV and Cookie Jar TV for months.

YouTube said Thursday that it wants to make subscriptions available as a self-serve feature to select partners soon. Asked how big of a cut YouTube is taking from subscription fees, a spokesperson told me that partners get to keep “the majority share,” without elaborating further.

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