Yahoo! Inc. (YHOO), Facebook Inc (FB) & Billion Dollar Mistakes?

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If I were a shareholder of either Yahoo! Inc. (NASDAQ:YHOO) or Facebook Inc (NASDAQ:FB) I’d be pretty upset about the companies spending a billion dollars on companies that don’t make any money. You can call it bold, but I call it risky. There are only so many advertising dollars to go around, and competing with so many other advertising platforms will make the success of these acquisitions difficult.

The bottom line

Yahoo! Inc. (NASDAQ:YHOO) has spent $1.1 billion on a company that is unlikely to ever make enough money to justify that price. A majority of the blogs on Tumblr are likely unattractive to advertisers, and with other platforms like Facebook Inc (NASDAQ:FB) and Twitter to advertise on, I doubt Tumblr will have much success monetizing itself. Just because a company has a lot of users doesn’t mean it’s worth $1 billion. I think that Yahoo will have to re-learn that lesson.

The article Billion-Dollar Mistakes originally appeared on Fool.com and is written by Timothy Green.

Timothy Green has no position in any stocks mentioned. The Motley Fool recommends Facebook. The Motley Fool owns shares of Facebook. Timothy is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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