In May 2013, Yahoo Inc purchased the blogging platform Tumblr for a price of $1.1 billion in a bid to boost its long term revenue. The decision follows a similar acquisition made by Google in 2006, when the search engine giant purchased YouTube for $1.65 billion. Since then, YouTube has remained the world’s most popular video-sharing website, with the famous PSY hit ‘Gangnam Style’ achieving more than 1.61 billion views as of May 21, 2013.
Yahoo’s purchase is a new leap into the social media industry and provides a valuable ‘cash injection’ for Tumblr’s blogging platform. Indeed, with the financial support of a major multi-billion dollar corporation, Tumblr will be much better placed to expand and consolidate its position as a leading blogging and social networking provider. However, this will depend on how Yahoo manages the platform and whether it will ‘retain’ or ‘abandon’ Tumblr’s existing user features.
Tumblr – still an autonomous company with an independent CEO
The chief executive of Yahoo, Marissa Mayer, says that Tumblr will continue to operate independently and will be managed by its current chief executive, David Karp. However, to help Yahoo increase its profits, Tumblr could be ‘monetised’ with new advertisements and stricter copyright rules, which could be similar to those found on YouTube today.
Since taking over as the chief executive of Yahoo in July 2012, Mayer has already acquired 10 start-up companies for a combined sum of approximately $16 million. It is believed that she made the move to purchase Tumblr to ‘rejuvenate’ the Yahoo brand and make it more relevant to younger Internet users, who tend to favour Facebook’s interface.
Reflecting a universal trend
Since Facebook purchased Instagram in 2012, the social media giant has let the photo sharing website run largely independently. In fact, many Facebook users are still unaware that Instagram is even owned by the company. The difference compared to YouTube, however, is that Instagram is not littered with advertisements; its sole focus is to gear traffic towards Facebook and divert it from other photo sharing sites like Photobucket and Flickr, the latter of which was one of Yahoo’s most disappointing acquisitions.
Tumblr was founded in 2007 and attracted tens of thousands of members within weeks. The company already hosts more than 100 million blogs and was valued at $800 million in 2011. Now, Yahoo will be able to optimise the data from Tumblr to its own pages, which will help the company boost its online traffic and improve its Search Engine Optimisation.
A long term revenue strategy
According to Mark Mahaney from RBC Capital, the deal ‘strategically makes sense’ but will not impact on Yahoo’s revenue in 2013 or 2014, although Tumblr should help the company expand into the social media and mobile sector in years to come. However, Monica Vila, the founder of The Online Mom, has been more optimistic about the decision and believes that the acquisition is a ‘great move’ for Yahoo and that the company will benefit from a a more ‘savvy mobile user base’, which will help it to maximise its revenue in the increasingly mobile-oriented social media world.
Danielle Haley is an online marketing specialist who co-directs a local freelance SEO company in Essex, UK. She’s a big believer in the marketing power of social media networks and enjoys keeping up to date with the latest social trends and technologies.