What’s On

If Tumblr doesn’t turn purple, the Yahoo-Tumblr deal is a win-win…

The challenges however are clear and present. Even though industry experts don’t foresee Yahoo!’s latest acquisition making a significant impact on the Asia market, there is no doubt in the minds of many that Yahoo!’s move to acquire micro-blogging platform and social networking website, Tumblr, is a step in the right direction, as long as a few conditions are met.

The Good Deal
It would be justified if Yahoo!’s acquisitions were eyed with some apprehension. The company’s history is after all dotted with its inability to reap results of some of the most expensive brands and services it had taken over. This is despite the success and fame the companies enjoyed at the time of the acquisition. Example such as Geocities that Yahoo! acquired in 1999, and shut down a decade later, is just one of the many cases in point. But Yahoo!’s move to acquire Tumblr has indeed turned heads. The key reason to do this, for Yahoo!, seems to be the young audience that Tumblr has captured in the last few years, more specifically in the last year. According to Posthaven’s Co-Founder, Garry Tan’s January 2013 survey amongst teenagers, Tumblr was more popular in the United Stated than social media behemoth, Facebook – a small but significant indicator of the success Tumblr is enjoying at the moment in the North American market.

For Yahoo!, the move allows a significant avenue to connect with young audiences. The deal gives Yahoo! “incremental userbase”, according to R Gowthaman aka G’Man, Chief Client Officer, Asia Pacific & CEO, South Asia & ASEAN, Mindshare Worldwide.

“There’s no doubt despite the rumour mill going at full force that this a surprise acquisition from Yahoo – almost tempted to say by Marisa Meyer (CEO, Yahoo!) as it’s her brand that’s building the share price. Tumblr has had epic success with the younger market and all that is the blogosphere, which is why I think Yahoo! has made the acquisition – to breathe a bit of youth in to all that it does,” added Dentsu Mobius’ Managing Director, James Hawkins.

For Tumblr on the other hand, the decision to sell may just help it in its growth targets, one of which is achieving USD 100 million in advertising revenues by 2015. Last year, Tumblr’s ad revenues were USD 13 million and Yahoo!’s expertise in the advertising sales area may just help with the target looking more realistic for Tumblr.

From a pure acquisition and evaluation viewpoint, this deal “ticks” all the boxes for Yahoo! — 90 quality engineers, 100 million unique users, complimentary target group, new content style compared to Yahoo!. “There is no doubt about the valuation or the arithmetic. It is only about the synergy and how it will be exploited, and the jury is out on that,” stated G’Man.

The Challenges
Yahoo and Tumblr need to do all the things that two involved parties do to get a marriage right – the first of which would be the ability to integrate while keeping the individual identity intact – in this case, more so for Tumblr. And the company’s co-founder David Karp appears to understand that. In a message to Tumblr users, Karp said: “Before touching on how awesome this (deal) is, let me try to allay any concerns – We’re not turning purple. Our headquarter isn’t moving. Our team isn’t changing. Our roadmap isn’t changing. And our mission – to empower creators to make their best work and get it in front of the audience they deserve – certainly isn’t changing.”

As per Karp, Tumblr gets better faster. The work ahead remains the same and the company still has a long way to go, but with more resources to draw from. He also said: “Yahoo is the original internet company and Marissa and her team share our dream to make the internet the ultimate creative canvas. I couldn’t be more excited to have her help. We also share a vision for Tumblr’s business that doesn’t compromise the community and product we love. Plus both our logos end with punctuation!”

But “not turning purple” brings on the first challenge. As G’Man puts it, “If Tumblr remains a separate brand, one needs to see how the user-base is going to be integrated on a common platform.” This would also have implications on Yahoo!’s ability to monetise Tumblr.

“Marissa Mayer has said that the company has many ideas of monetising Tumblr without impacting the core offering of the blogging platform. At the same time, Karp has been very focussed on managing user experience and is wary of paid banner ads. It will be interesting to watch out for the ideas on monetisation,” observed Gautam Dutt, MD, Digital, Havas Media Singapore.

The alliance will not automatically open up ad revenue streams for both companies. Tumblr’s user base has largely remained a 17-19 yr target group, and even though this is the set Yahoo! is eyeing, this presents the second challenge. “This age bracket remains rebellious and there is enough evidence from the way most of them have reacted on the acquisition. The reality is that we are yet to see the strategy unfold on how the user base is going to be used for mutual benefit,” said G’Man.

The third challenge is whether Yahoo! is willing to learn a little from Tumblr’s way of working. “Yahoo has to infuse the culture of a tech company. It has traditionally behaved like a media company where the tech guys did not get the importance they got at places such as Google or Facebook. As a result, Yahoo has not been able to develop any new products worth talking about. The Tumblr acquisition can help Yahoo if it inspires a culture of a technology company,” pointed out Dutt.

An Asia Impact?
Drawing attention on whether this much talked about deal is about to make any impact on Asia, Hawkins said, “For us in Asia, this is more a tell-tale of what is likely to happen here not only with Yahoo-Tumblr but also the Asia equivalents. WeChat for example is pushing very hard and there is a market share land grab going on in Greater China. Getting relevant ads in front of your target market at the right time is still the name of the game and the winners will be marked down as those that achieve this.”

The broad industry view remains that the deal would see more impact in the United States and some of the other Western markets for now. But would Tumblr make a bigger impact in Asia with Yahoo!’s backing, that would still be a wait and watch.