Baby steps to big acquisitions
Tumblr is not Yahoo!’s first headline-making deal of 2013, but it’s definitely the most high profile, and at $1 billion, it’s also the biggest. Earlier in the year, Yahoo! Inc. (NASDAQ:YHOO) announced it would acquire British news reader app Summly for $30 million, and also made a deal for Jybe, a social-recommendation site. The choice to buy out little-known companies confused investors at first, but it generated media attention and went in line with Mayer’s plans to make Yahoo! more relevant in mobile applications and social media.
These moves may have also influenced some of the industry’s reigning titans. A few weeks after the Summly deal, the great and powerful Google Inc (NASDAQ:GOOG) announced that it, too, would be purchasing a news summarization app, Wavii. Whether the company’s Summly deal had a direct impact on this decision or not, Yahoo! Inc. (NASDAQ:YHOO) acted before Google Inc (NASDAQ:GOOG) as opposed to following in its footsteps. This could be a promising sign for the company.
I’ll Tumblr for ya
Buying out Tumblr is Yahoo! Inc. (NASDAQ:YHOO)’s biggest leap yet in crafting a social media presence. Yahoo! Inc. (NASDAQ:YHOO) has desperately tried to regain its “cool” factor of the 1990s, and Tumblr, with 26-year-old founder David Karp and its emphasis on youth culture, is already a household name for the exact demographic Yahoo! is trying to target.
Shiny veneer aside, Tumblr can also put its money where its mouth is. The company generated a mere $13 million in 2012, but it brought in $125 million through investor funds, and only spent 20% of that on operations last year. Its user base is also rapidly growing — in April 2013, the company saw a total 18 million unique mobile page views, nearly double from April 2012. For comparison, Instagram, the photo app that Facebook Inc (NASDAQ:FB) ultimately acquired for $715 million last year, was estimated to have only brought in 2.7 million users this past April.
Does this buyout make me look mainstream?
An acquisition by a much larger company could damage the original company’s customer loyalty. Mayer, however, insists the merger will not result in “Yahoo! Inc. (NASDAQ:YHOO) branding on the Tumblr site. We want to let Tumblr be Tumblr, and let Yahoo! be Yahoo!.” With Karp on board for the next four years, it looks like Mayer may be true to her word. There just might be a bunch more ads involved.
During Mayer’s short tenure as CEO, Yahoo!’s buyout deals have become increasingly bold, and a company that was once presumed a has-been is back in the media spotlight. Additionally, its annual revenue rose (by albeit a tiny margin) for the first time since 2010. It’ll take more than a strategic acquisition to revive Yahoo! Inc. (NASDAQ:YHOO), but Mayer has made meticulous calculations to get back into the foreground of the tech industry — and all in less than one year.
The article Is Yahoo! Stumbling With Tumblr? originally appeared on Fool.com and is written by Caroline Bennett.
Fool contributor Caroline Bennett has no position in any stocks mentioned. The Motley Fool recommends Facebook and Google. The Motley Fool owns shares of Facebook and Google.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
