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Today’s Burning Question: Implications of Yahoo’s Tumblr Acquisition?

Written on
May 20, 2013 
Author
Mike Daly  |

ADOTAS – Today we’ve solicited comments from industry leaders in response to the following Burning Question:

“What will be the implications of Yahoo’s acquisition of Tumblr?”

Here’s how they’ve responded:

“Yahoo! is no stranger to large acquisitions, and its purchase of Tumblr is one that’s actually one of the smaller purchases the company has made over the years (Broadcast.com and Geocities being two giant busts and Overture eventually becoming their search platform). Needless to say, Yahoo!’s acquisition strategy hasn’t exactly worked out in the past. But now Marissa Mayer in charge and things are supposed to be different. In this morning’s investor conference call, Mayer reiterated that her vision for the platform around ads is that Yahoo! will focus on ‘serving up native ads where every ad is as good as the content.’ I found this to be an extremely ambitious statement and am going to watch closely as to how Mayer plans to pull this off. Yahoo! also expressed a lot of interest in Tumblr’s content management tools and the way Tumblr has gotten users to consume and share content. Mayer made it seem like this was a huge opportunity for Yahoo! to seize and infuse that kind of native virility into its culture. As a media company, I can only imagine that Yahoo! is interested in Tumblr as a kind of ‘virility engine’ that would amplify its content – however it is still foggy as to how the two brands will coexist. A big draw to the Tumblr platform is the regurgitation of culture and the proliferation of animated .gifs as a means to muse over cultural shifts and absurdities. The format that these musings take shape on Tumblr is typically copyrighted material that will be challenged by this purchase akin to how YouTube and Google had to overcome a similar issue with content. I am unsure how Tumblr will be able to grow as a cultural entity without the use of the material it has become famous for hosting. – Craig Elimeliah, VP Director of Creative Technology, RAPP.

“This purchase is a little like when News Corp. bought MySpace. Although I desperately hope it doesn’t end up the same way. Within a year of the purchase, News Corp had all but destroyed what was left of the MySpace brand, having attempted to absorb the “coolness” of its younger competitor. They quickly went on to re-sell the brand (at a huge discount). And, within no time at all, News Corp was, well, News Corp again. Yahoo claims they won’t “screw up” the Tumblr brand. But when you force two very different cultures together, one has to ‘win.’ Sadly, I think it will be Yahoo’s.” – Matt Eastwood, CCO of DDB New York.

“Acquiring a 180+ million unique user property, which there are very few, provides Yahoo a very unique position as it relates to a massive audience on a global scale. The challenge is large media companies and publishers are yet to prove monetization through a page-based, impression model and Tumblr has a lot of impressions. Surely, a huge component of Yahoo’s bet here is Tumblr’s opportunity to expand to mobile. It will be important for them to innovate their ad product and triggers, most importantly, that are conducive and intuitive to the user experience. This is a great win for Tumblr and I think it is important to note that the acquisition’s value price is tied directly to the value Yahoo sees in Tumblr and its opportunity in mobile.” – Chris Cunningham, co-founder and CEO of Appssavvy.

“Yahoo buying Tumblr is a smart move, it brings a fresh demographic of younger users to their mix.  Monetizing Tumblr, especially on mobile will be a challenge.  Just look at Facebook, it has taken them 2 quarters to start monetizing mobile more efficiently.  It’s going to take Yahoo time and resources to monetize Tumblr mobile traffic. Tumblr has been playing around with ‘native’ ads which are still unproven on mobile and hard to value.  It will be interesting to see how Yahoo sells through this inventory as it scales.” – – Howie Schwartz, CEO and Founder of Human Demand.

“Similar to Google’s acquisition of YouTube, this could be the best acquisition that Yahoo has made to date, but the key is monetizing Tumblr traffic effectively. It is certainly a demographic that Yahoo has missed, but the door is now open. Tumblr will be a great addition to Yahoo’s properties and services.” — Jan Rezab, CEO, Socialbakers.

“Yahoo’s acquisition of Tumblr, while expensive, goes a long way to addressing Yahoo’s inherent needs of reaching a younger demographic and reaching consumers via their mobile devices.  Tumblr’s audience skews young, is tech saavy, and will provide Yahoo! with all kinds of great insights as they figure out how to adapt their core products and services in the future.  I also believe there is a huge monetization opportunity with Tumblr using native ad formats, both on desktop and mobile.  A huge thumbs up to Marissa for pulling off this acquisition which was no doubt competitive.  Previous Yahoo! CEO’s tried to buy Facebook, Twitter, etc. and were unsuccessful.  Marissa put her mind to getting Tumblr and made it happen.” – James Walker, CEO and Founder, inadco.

“This makes Yahoo! more relevant, while solving their growth issues, and creates an opportunity for real-time marketing, with data being their biggest currency. Buying Tumblr is a smart decision for Yahoo! – the company needs to have a seat at the table in order to compete in a social world. Facebook has its own network and Instagram, Twitter has its own network and Vine, and Google has Google+. Therefore, Tumblr becomes Yahoo’s solution. Yahoo is cementing its position as the place for advertisers to discover not just premium content but premium audiences. This makes Yahoo a must-buy. The challenge now will be for Yahoo to evolve its ad tech to take advantage of this opportunity.”– Kamal Kaur, VP of Mobile at RadiumOne.

“Yahoo and Tumblr complement each other well. Yahoo brings plenty of resources and a deep understanding of brand advertising on the Internet while Tumblr brings an incredible focus on creativity and community. We’ve seen Tumblr transform into a strategically important channel for brands over the past several months and I think having Yahoo’s backing will only accelerate that process. Overall, I think we’ll see a Tumblr that grows even faster while maintaining the unique aspects of its community that have served it so well for the past six years.”  -- Hayes Davis, co-founder and CEO, Union Metrics.

“Yahoo’s acquisition of Tumblr says several things. First it says that Yahoo is back in the game after having missed the bus on so many social media opportunities. Yahoo is trying to target a more hip and younger audience with Tumblr. Next it sees a revenue stream as Tumblr pages will offer advertisers prime areas to advertise and after having seen Google and Facebook make strides with online ads, Yahoo sees advertising on Tumblr as a way to reinvigorate its online advertising programs for advertisers.” – David E. Johnson, CEO, Strategic Vision, LLC.

“Tumblr is high affinity audience that gives Yahoo access to the active fan community for sports and music, [and] significant opportunity to monetize that audience through contextual advertising, such as TiqIQ.” — Jesse Lawrence, CEO/Founder of TiqIQ.com.

“The purchase of Tumblr by Yahoo is an aggressive step forward for Marissa Mayer and Yahoo. She has made it very clear that change is paramount. After 10 start-up purchases under her, this is clearly the most significant and valuable. Tumblr presents a unique and inviting opportunity for Yahoo. With over 100 million blogs already, they provide a built-in customer based with an even larger viewer-base. Both these categories tend to skew on the younger demographic, which is an overall goal of Yahoo’s overhaul. The rumors are that Tumblr will retain its employees and continue to run itself which means that Yahoo has increased its talent pool as well. Tumblr offers Yahoo a variety of opportunities to further monetize the investment. At a minimum, the increased advertising opportunities through the blogs should provide a boost, but I assume that there will also be some level of integration of the blogs into Yahoo’s home pages. This should provide easier access for readers and better exposure for bloggers. Overall, I think the purchase is a great move by Yahoo. The price tag is steep, but Yahoo has made it clear that they are ‘all-in’ and dedicated to making themselves a marquee name again.” — Dan Roche, VP of Marketing, TalkPoint.

“Like AOL and MySpace, Yahoo was once a dominant force in the new media landscape, but was unable to adapt to the fast-changing media environment, falling behind and being displaced by other sites and services, Google in particular.  As a consequence, Yahoo also lost its cachet, its coolness factor, and became old hat, albeit one that retained a significant following, and a good amount of resources.  The comeback game is not an easy one, however, as MySpace is discovering, and rather than trying to relaunch itself, Yahoo seems to be following AOL’s lead, as AOL’s acquisition of The Huffington Post arrested AOL’s decline, and started to turn its fortunes around.  Of course, picking up Twitter would be the ultimate prize, but if Google and Facebook failed to acquire that microblogging platform, Yahoo certainly wouldn’t have any luck in doing so.  But Tumblr is most definitely a valuable asset, and a good fit for Yahoo as it provides a blogging platform and a service for personal expression that has been missing from Yahoo since they eliminated GeoCities in the US. While not as popular as Google’s Blogger or WordPress, Tumblr bloggers are notable for not being as “writerly” or text-oriented as other bloggers, so it does resemble Twitter to some degree, and is certainly more accessible and less intimidating than the other types of blogs. Tumblr blogs tend to be more image-oriented as well, making it a precursor to Pinterest, the platform that quickly rose to the number three spot in social media behind Facebook and Twitter.  And as bandwidth has become less and less of an issue, the emphasis in new media has shifted from text to pictures and audiovisual formats, which has much to do with Tumblr’s popularity. So while Tumblr won’t rocket Yahoo to the top of the heap, it will make the service current and relevant once again, not just an interface offered such “old-fashioned” services as email, discussion groups, news feeds, and the ubiquitous advertising.  The latter is key, because Yahoo desperately needs to attract eyeballs, and its failure to hop onto the social media bandwagon meant that it missed out on the bonanza of user-generated content that brings in big audiences.  Tumblr will change all that, and may be the start of a reversal of fortunes, but it will take the acquisition pf a video service such as Vimeo to really turn things around.”  – Dr. Lance Strate, Professor of Communication and Media Studies and Director of the Professional Studies in New Media program at Fordham University.

“Clearly this is part of Yahoo’s turn-around strategy. It is a big effort to graft on some cool to the Yahoo brand and indeed connect with a 18-24 franchise, not to mention the influential part of that franchise. Tumblr has many of the characteristics of a beautiful business and Yahoo has recognised this and want a piece of it. Most notably it has had a clear sense of purpose and integrity in being the a social platform devoted to the creative class, those who have ideas and want to express these ideas and those who want to listen, and has stuck steadfastly to this rejecting any easy ways to commercialise and monetize along the way that might compromise what they are for: ‘Follow the World’s Creators’. Secondly, their success attracting an audience of 170 million a month is down to the elegance and simplicity of how they have seamlessly integrated the many different modes of expression such as text, video, photos, music into one unified social platform. It is inescapably usable.” – Pearse McCabe, Director of Strategy, London, Dragon Rouge.

“Although it makes sense from a business perspective – Yahoo sells ads and Tumblr has lots of eye-balls they can target, it could be damaging to the Tumblr brand. The whole concept of Tumblr is about individuals creating and curating their content. Once you start splashing banner ads on people’s pages its risks creating a disconnect and alienating them from the platform.” — Clara Henning, Director of Strategy and Innovation, New York, Dragon Rouge.

“Setting aside the question of value (did Yahoo overpay?), this deal makes tons of strategic sense for three reasons. First, Yahoo immediately obtains Tumblr’s massive audience of younger, highly-engaged users. Advertisers covet that audience and now Yahoo has a tremendous source of those users to promote to its advertising clients. Not only the size of the audience is attractive but also the behaviors in which the audience is engaged when using Tumblr: content discovery, creation, and sharing. That is gold in the rapidly growing world of content marketing. Second, it is about the content. In Tumblr, Yahoo is getting an incredibly deep and broad collection of user generated and brand generated content to provide a very powerful vehicle for advertisers to target messages in very contextually relevant ways, including ‘Native Ads.’ Finally, it is about the platform. Tumblr is a fun, easy to use, and engaging content creation and distribution platform. Its popularity is a testament to that. Much like Google’s acquisition of YouTube and Facebook’s acquisition of Instagram, this deal is about Yahoo gaining a platform hundreds of millions of us spend time on to create, connect, discover and share content of all different kinds. The audience and potential for significant ad revenue is already there so now it is a matter of how Yahoo goes about monetizing it without spoiling the experience or alienating the audience.” — Ben Straley, vice president, social technologies at Rio SEO.

“With the acquisition of Tumblr, Yahoo! CEO Marissa Mayer demonstrates her commitment to providing tools that enhance people’s ‘daily digital habits.’  Until now, Yahoo lacked a genuine social platform, which proved to be a definite weakness in its portfolio. Tumblr has been a popular platform for creative expression and social sharing and is the origin of many of the Internet’s most recognized memes such as ‘This Advertising Life’ and ‘Texts from Hillary.’  While Tumblr’s revenue has been relatively small, driven primarily by display ads, Yahoo! will give Tumblr a sophisticated, targeted advertising capability, which can increase revenue quickly. Yahoo’s challenge will be to do so without stripping Tumblr of the simplicity and authenticity that has made it so successful in the first place.” – Matt Witt, EVP, Director of Digital Integration, TRIS3CT.

“Remember the one time that big company bought that little plucky service and poured its resources and know-how to make it into an even better place for its users? Yeah, me neither. The immediate implication of the deal will be that Tumblr’s relatively new ad platform gets some upgrades. And we’ll see more ads in our dashboard. And we’ll hear Tumblr a lot more in the press. The strength of Tumblr has always been that it affords niche groups connection through shared interests using predominantly re-appropriated images. So, first of all, Yahoo! now finds itself embarking on the tricky path of monetizing fan labor and “stolen” content. Second, even though Ms. Mayer promises not to ‘screw it up,’ she’s already, and I think arrogantly, promising that Yahoo! will offer Tumblr users better ways to connect. In the annals of fixing what’s not broken, this one ranks pretty high.   I also question the culture play. Amazon bought Zappos for its cult of customer care, with a believable role for their CEO. With her cancellation of the company’s work from home policy and her insistence that burnout is caused by ‘resentment,’ Mayer seems to be championing anything but the Silicon Alley culture exemplified by Karp and Co. Even with the questionable impacts, I do suspect this deal will lead to more acquisitions. How long can Pinterest sit out the dance, now? Will other services like Medium go from relative obscurity to shiny object overnight? Surely Microsoft will want into the social game (beyond Xbox), too. It’s wedding season, after all. (Ok, ok, maybe YouTube.)” – Bud Caddell, Deutsch LA‘s SVP, Director of Invention and Digital Strategy.

“Yahoo needed to capture a younger audience, acquiring Tumblr is definitely a move in the right direction, giving them yet another asset with a strong mobile audience and an opportunity to get involved with social media advertising and mobile advertising in a big way. The key now resides in how they will integrate Tumblr into the Yahoo family.” – Marc Poirier, Co-Founder & EVP, Business Development, Acquisio.

“Yahoo has a few challenges when it comes to achieving a positive ROI for this acquisition.  Yahoo may need to establish a baseline revenue using traditional display while they experiment with native advertising that will work.  Here’s some issues that Yahoo will have with monetizing Tumblr using advertising: First, Tumblr is not built for traditional display.  Using traditional display advertising will either cause a more negative user experience, or a new layout, which may cause a negative backlash among it’s users and platform abandonment. Second, Native advertising works on Tumblr, but needs to grow at an exponential rate. Third, Tumblr is full of blogs that aren’t brand safe (adult content, etc).  I think a very important question to answer is what percentage of Tumblr’s page views are unsuitable for advertising.”

Justin Kennedy, COO, Sonobi.

“The pundits will debate if the Tumblr deal makes sense for Yahoo’s shareholders, if it can be integrated successfully, and if Yahoo overpaid – but what seems inarguable is the attractiveness of a social platform that engages a younger generation of consumers who connect and influence each other. While analysts tend to think of the commercial significance of social platforms purely from an ad perspective, marketers need to look deeper. They see platforms like Tumblr as a way to capture a younger generation of consumers ready to connect and influence each other directly – in a world where more than 90% of consumers trust their friends opinions more than any commercial messaging.” — Vijay Sundaram, CMO, SocialTwist.

“Yahoo acquiring Tumblr only provides Yahoo the fuel and potential to thrive – but nothing more.  Marissa Mayer states that she ‘promise[s] not to screw it up’ but intends for Ads on the site to ramp up by 2014 (link).  Consumers of products like Tumblr are “ad-allergic” and extremely weary of how advertising affects experience.  With the coming of new Tumblr-like companies like Svbtle and Medium, the question is whether or not users will abandon the Tumblr ship because free alternatives exist or see true value in Tumblr despite the impending monetization strategy Yahoo/Tumblr has for it. If Yahoo’s treatment of their own home page with in-stream advertising is any indicator of what is come for Tumblr, they may be onto something.  Last month Yahoo introduced new ad formats that embed into their Twitter-esque newsfeed on the Yahoo Home Page (link).  Similar strategies implemented on Tumblr could help strike the right balance and not have Tumblr users running to competing services.” – Roj Niyogi, co-founder and CEO, Perk.

“Buying Tumblr was a bold and risky move. Tumblr has had tremendous success and has generated $13 million in revenue in 2012. There obviously is a lot of hype around the blogosphere, which stands and falls with the base of bloggers. A lot of bloggers are reportedly nervous about Yahoo taking over and have already stated moving their blogs elsewhere, so the risk is if Tumblr can keep its success up and keep its bloggers happy under Yahoo leadership. Tumblr represents a chance for Yahoo to get involved in social media, mobile and with a younger crowd.  In terms of lead generation, this partnership is interesting because Yahoo’s personalization feed could be used in Tumblr users’ content stream. A bold move by the CEO Marissa Mayer who has been actively pushing to modernize the company and to keep Yahoo relevant by making it attractive for a younger crowd.” — Bas Offers, Co-Founder and COO of ReviMedia.

“If there’s one thing we all know, it’s that a new form of native advertising is spreading throughout the Internet. Left out of this evolution, until now, has been Yahoo!. When you break it down, Yahoo! is a Very Large Display Advertising business, with a hefty side of search and a bit of this and that on top. And that display advertising business is going through a wrenching shift, as buyers move to more efficient programmatic channels. CPMs are rapidly declining for ‘standard display’ units – the boxes and rectangles that built Yahoo! and much of the rest of the web. Yahoo! is already shifting its home page and other content sections to a stream like interface. Tumblr offers only native ad units, built from the ground up as an activity stream. Yahoo’s move gives it an asset that its branded display sales force can sell as sexy: native, content-driven advertising at scale. A good move. More thoughts are on my blog here.” – John Battelle, Founder and CEO of Federated Media Publishing.

“What does Tumblr do for Yahoo? It gives Yahoo mobile relevance overnight. It introduces nearly 200M coveted, monthly unique visitors to it’s ecosystem. It endows Yahoo with some much needed cool. If ads are the future of monetization for Tumblr, Yahoo is well-positioned to accelerate that story. Yahoo has gone stale and has little choice but to make some bold acquisitions if it wants to retain its foothold as a tech giant. Tumblr + Yahoo is not a guaranteed victory, but it would be hard to argue it’s not a sensible, if not brilliant, move on Mayer’s part.” Ophir Tanz, Founder and CEO, GumGum.

“It will be interesting to see whether Yahoo is looking at Tumblr to turn a profit for them, or simply give them ownership to Tumblr’s 300M users per month. Probably both, but all very different strategies. Destinations like Tumblr represent the ever increasing platform for users to express themselves, and to talk about anything and everything. In our world, and as brands continue to behave like humans, and are talked about as humans, growth in Tumblr by virtue of its association with Yahoo is significant. As was Facebooks’s purchase and ultimate growth plan for Instagram. Its further confirmation that the planned marketing brief is just a single component of where our attention as advertisers must lie. Reacting to real-time conversations is of equal, if not greater, importance.” — John Minty, Chief Operating Officer of DDB California.

 





Mike Daly is an award-winning writer and editor with 30 years of experience in publishing. He began his career in 1983 at The News of Paterson, N.J., a long-since defunct daily paper, where at age 22 he was promoted to the position of Editorial Page Editor. Since then he has served in managerial capacities with several news organizations, including Arts Weekly Inc. and North Jersey Media Group in New Jersey and Examiner Media in New York. His work has been honored on numerous occasions by the New Jersey Press Association and the Society for Professional Journalists.

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