Something old, something new: Yahoo buys Tumblr
The mixed reaction to internet veteran Yahoo's $1.1bn purchase of fashionable blogging web site Tumblr comes as little surprise. Nicola Smith looks at the implications...
The mixed reaction to internet veteran Yahoo’s $1.1bn purchase of fashionable blogging web site Tumblr comes as little surprise. While Yahoo was once a name synonymous with the rich commercial possibilities of the digital revolution its star has since faded, something its purchase of the then thriving Flickr – its light now equally dimmed - in 2005 only reinforced.
Conversely, Tumblr’s 54 million users are very engaged and hugely loyal (there are 70 million posts a day) with a high number of users in their teens and early twenties, and the visual nature of the site appeals to a vibrant creative community. It is an audience that is highly attractive to advertisers, yet inherently sceptical of advertisers, and founder David Karp’s comments resonated strongly with his user base when he declared in 2010 that the company was “pretty opposed to advertising.”
But times change, and businesses can’t survive on creativity and energy alone; something had to give. In the US in May last year, in a departure from Karp’s perhaps idealistic comments from three years ago, Tumblr launched its first official ‘sponsor’ products, offering brands the opportunity to pay to be featured in Tumblr Radar, where sponsored posts are displayed in the sidebar, and Tumblr Spotlight, which inserts recommended posts into a user’s feed. (These were introduced in the UK in November 2012).
Despite the Tumblr platform’s considerable creative potential for brands to deploy imagery and video in interesting ways – and in spite of Adidas kicking off the action with a huge campaign for Euro 2012 in the US - Tumblr reportedly generated a modest $13m from advertising in 2012. Danielle Morrill, CEO and Cofounder of Referly, even wrote in her blog, “According to Forbes Tumblr is targeting $100M revenue in 2013 but, according to sources I spoke to who are familiar with the company, actual Q1 revenue growth was flat and Tumblr is on track to do only $15 million in revenue this year.” Compare this to Facebook’s reported revenues of over $5 billion in 2012, and there is some work to do.
Is Yahoo the answer? It may not be hip, and it may have shown little sign of user or revenue growth recently, but it does still reach 86 percent of US internet users per month (according to comScore’s data), and ranked second behind Google in the US with 191 million unique visitors in March 2013. The acquisition of Tumblr will grow this user base by 50%, according to Mayer, meaning Yahoo still has quite some clout.
While Mayer says the company will work with Tumblr to create ads that are “seamless and enhance the user experience”, its acquisition further propels Tumblr’s once free spirit towards commercial conformity, seemingly upsetting some users. The day before the deal was announced, founder of fellow blogging site, WordPress, Matt Mullenweg wrote that imports of blogs from Tumblr had “spiked” as a result of the acquisition rumours, writing that “normally we import 400-600 posts an hour from Tumblr, last hour it was over 72,000.” (That said, Tumblr reportedly adds 75 million blog posts a day.) Yahoo CEO, Marissa Mayer was clearly anticipating a less than warm response to the deal from Tumblr users and has taken it on the chin, posting a GIF that reads, ‘Yahoo. Tumblr. Now Panic and Freak Out’.
Achieving monetisation without detracting from user experience is a delicate balance to strike, and even Facebook has seen use drop by nine per cent in the UK, with the YouGov Sixth Sense report suggesting that the number of respondants who have stopped using social media sites because they are “fed up with marketing promotions” has risen by 18% over the last year.
In a similar vein to Facebook’s page post ads and Twitter’s promoted tweets, Tumblr also launched mobile in-stream ads in April 2013, giving brands access to users’ streams amid friends’ posts. This may yet prove lucrative, and mobile is an area where Tumblr has form. The launch of its official iPhone app in 2009 gave the company an important competitive edge in attracting more blogs than sites like WordPress.
In the UK, Tumblr has also partnered with We Are Social, Poke, AKQA and Bartle Bogle Hegarty, giving the agencies access to Tumblr data and specialist training with a view to, presumably, creating more compelling opportunities for brands to market themselves effectively in a way that also enhances user experience.
But there has been criticism that Tumblr’s metrics are not robust enough to meet advertisers’ demands, and that brands are only able to target by user interest and not demographically. It is an area where Yahoo’s expertise will surely help, given that the majority of its revenues come from advertising. As Fred Wilson, a venture capitalist and one of Tumblr’s early investors has said, Yahoo also has strong relationships with the marketing community. “They have big budgets from those marketers and for them to say, ‘Why don’t you take $10million from your budget and stop buying banners and start buying native promoted content inside Tumblr, that’s huge for Tumblr. That’s going to get them parity with Facbeook, Twitter and YouTube in marketers’ mindsets in a way that they would not have ever gotten on their own.”
There may be some hurdles to overcome, but on closer inspection, the marriage of Yahoo and Tumblr could see a powerful fusion of assets and provide an interesting new proposition for advertisers – and a lifeline for Yahoo.