11 ms·

I had heard the "well below 20m" figure and couldn't believe it—and now Fred is saying they dumped it for $3 million? I suppose if Verizon is taking the tax ded

by laser 7y ago

I had heard the "well below 20m" figure and couldn't believe it—and now Fred is saying they dumped it for $3 million? I suppose if Verizon is taking the tax deduction on an original $1.1 billion purchase by Yahoo, the value of the deduction so much dwarfs the sale price that the difference to Yahoo between a $3 million sale price and a $50 million sale price is pretty minimal—they just want to close the deal to take the deduction and stop the losses. Still, considering the fact that Tumblr still does over 2.5 billion page views per month [1], not even counting their mobile usage, I can't help but gawk at what a steal Automattic got. Really drives home what their CEO Matt Mullenweg said on here the other day about adopting a "Berkshire model"—although he was referring to independent management, what he's really talking about is buying companies grossly undervalued for dirt-cheap. Just monetizing the web traffic 2.5 billions monthly hits at a $1 CPM alone would generate $2.5 million a month in revenue, $30 million annually. What kind of business, let alone web business, sells for 1/10th annual revenue? For reference, Reddit does 6x the page views, but is valued at $3 billion. Reddit's prospects are obviously better, but are they 1000/6 = 166x times better per current page view? Mind-boggling. [1] https://www.similarweb.com/website/tumblr.com https://www.similarweb.com/website/tumblr.com

jartelt 7y ago
Assuming you want to keep Tumblr running, you are also buying the ~200 employees and the costs of running the site. Assuming the 200 employees cost $100k each (salary + benefits) and you are already at $20M in costs.
- laser 7y ago
  If I bought Tumblr in a $3 million fire sale, I don't think I'd keep 200 employees on the payroll, but yes, it combined with the tax write-off and infrastructure costs it's reasonable for Yahoo to want to dump it as fast as possible—they could easily be losing $5M a month on it. I'm just shocked there aren't more opportunists in the market that would have bid the price up to at least something resembling reasonable. That being said, even an extremely well-executed turn-around could be 6 months until break-even, which would require potentially upfront $30 million in losses, in which context the sale price is insignificant, and so the question becomes who has web business expertise + $30 million in cash to burn and desire to confidently make a $15-20 million annual profit business a year or two out. Apparently, not many people/companies.
  - y_molodtsov 7y ago
    He specifically said they’d continue to employ all of them.
  - rjvir 7y ago
    > If I bought Tumblr in a $3 million fire sale, I don't think I'd keep 200 employees on the payroll Keeping most of the 200 employees on payroll may have been a condition of the $3m sale price.
    - laser 7y ago
      Such a condition would definitely explain the price—although that would still be a pretty surprising condition.
  - henrikschroder 7y ago
    > it's reasonable for Yahoo to want to dump it Verizon, not Yahoo.
steveklabnik 7y ago
The article with “well below $20 million” was later revised to be “$3 million”; this wasn’t revealed by Fred.
overcast 7y ago
Off topic here, but reading this text blob, would it hurt HN to increase line-height a smidge? Like to ~1.5x? That would be 13pt and SO much easier to digest.
- Chyzwar 7y ago
  You can do it yourself via Stylus extension, I have solarized dark theme applied.
- laser 7y ago
  Broke it up into 3 paragraphs now >.<
- valar_m 7y ago
  If you use Greasemonkey/Tampermonkey, here's a paste of the quick and dirty script I wrote a long time ago to fix the exact issue you're talking about: https://pastebin.com/QJZSEy2D https://pastebin.com/QJZSEy2D It does indeed make HN much easier to read.
nostrademons 7y ago
IMHO Wordpress itself is grossly undervalued. I've done some whole-web analysis and they (including both the open-source project and the hosted service) account for roughly 18% of the web. The volume of content produced on them (in terms of # of words, not # of messages) is greater than on Twitter. If you look at comparables - with Twitter valued at $30B, Reddit at $3B, and Wordpress valued at $1.16B - it's pretty hard to justify those valuation disparities. Sure, it's open-source and non-hosted-by-them Wordpress installs don't really make much money for the company, but you could argue that they actually have more control over the greater Wordpress ecosystem than Reddit does over famously revolt-prone subreddits. Unfortunately, they're private, profitable, and to my knowledge not seeking investment, otherwise I'd buy a slice of them in a heartbeat.
- avn2109 7y ago
  Another interpretation of your (insightful and valid) comment is that Twitter and Reddit are severely overvalued.
- panopticon 7y ago
  I think investors like the fact that Twitter and Reddit control all of the user data and (mostly) where and how it's surfaced. The idea is they can somehow monetize this data (e.g., ad revenue). Obviously they haven't been able to do that yet. There's a chance those platforms are very over-valued... but you can see where some people think the golden goose is.
- deleted 7y ago
  [deleted]
- ramphastidae 7y ago
  The valuations are fine. Firstly, WordPress is not valued at anything as it is not a private company. You are thinking of Automattic, which is a managed host that owns wordpress.com and makes their money on ads and subscriptions. Their share of and profit from the WordPress ecosystem is much smaller than you think, blogs / websites are commodities at this point, and there is no reason to think there is a relationship between volume of content and valuation. Meanwhile, Twitter and Reddit are massive social networks with millions of daily active users.
deleted 7y ago
[deleted]
mbesto 7y ago
> said on here the other day about adopting a "Berkshire model" This is not the Berkshire model at all. Berkshire buys businesses that have high cash flow models where money can compound over and over, usually in well established businesses that have operational issues that can be optimized for cash flow. > Just monetizing the web traffic 2.5 billions monthly hits at a $1 CPM alone would generate $2.5 million a month in revenue, $30 million annually. That napkin math doesn't take into consideration: - hosting costs - software maintenance cost - sales & marketing required to drive $30M/year - Decrease in traffic due to ads - Ad-blockers > What kind of business, let alone web business, sells for 1/10th annual revenue? Retail does...retail. Hate to break it to you, but businesses aren't bought and sold on revenue (despite what TC tells you). It's usually on a multiple of earnings or discounted free cash flow. Note - it's important to remember that DCF can get real fuzzy and hence why its much easier for media to just revert to "revenue". > Reddit does 6x the page views, but is valued at $3 billion. And Tumblr's valuation was once $1.1B and they couldn't monetize it. How is that comparable a valuable reference point?
- lowdose 7y ago
  Yep, DCF is all about the multiplier.
- Ayesh 7y ago
  I run a web service that gets around 10m hits a month, and I serve one popup ad (yuk, I know) per day (or until cookies are cleared). Compared to revenue, hosting cost is next to nothing for sites like Tumblr that serve text/image content. A similar video site would need to spend a ton of money on bandwidth, streaming CDNs, encoding servers, etc. If you get 2.5 million hits a month, it is certainly possible to cover the said selling price of $3m in ads alone in a month.
  - home_project123 7y ago
    Could you please email me to discuss a possible revenue addition? home_project123 at protonmail dot com It is non-yukky and does not affect your content/users
  - 7y ago
_bxg1 7y ago
Verizon didn't just fail to figure out what to do with Tumblr, it dealt what was nearly a death blow by changing its policy on adult content - one of the platform's biggest remaining pillars of core users. Tumblr doesn't still exist because of its features; it exists because of its communities. Leave it to Verizon to not just starve a golden goose, but shoot it in the head.
- IB885588 7y ago
  This is exactly what happened. Verizon probably didn't know that most of the traffic they were buying were because of adult content, and then they killed that. I wish they had sold it to Pornhub instead.
  - chipotle_coyote 7y ago
    Verizon didn't buy Tumblr. Verizon bought Yahoo/Oath and ended up with Tumblr. It's a very different scenario. It's important to remember that Tumblr never turned a profit; as far as I've been able to determine it never hit the break-even point. And the bottom line is that a giant service that's losing money is worse to own than a tiny service that's losing money. Verizon's attempt to kick out the NSFW parts wasn't simple-mindedness or prudishness, it was a calculated risk that a smaller but SFW Tumblr might be able to at least make enough money to pay for itself. Having said that, it's also important to note that Tumblr still gets a lot of traffic; by most measures it's still in the top 100 most visited sites on the Internet, and gets more traffic than Wordpress.com -- Automattic's closest "competing" product -- does.
    - henrikschroder 7y ago
      > Verizon bought Yahoo/Oath Verizon had ATH - AOL, TechCrunch, Huffington Post, then bought and added yahoO to the group, hence the name. Yes, that is exactly how uninspired these corporate names are.
      - evanelias 7y ago
        Do you have a source for that? I worked there at the time of this unholy merger, and that explanation for the name was never given. From what I recall, Tim Armstrong claimed the name reflected Verizon's promise to do right by AOL and Yahoo, or some other such complete nonsense. Internally, everyone I knew thought it was on par with Tronc for worst rebrand ever.
scarface74 7y ago
Yahoo proved that page views don’t really mean much. Yahoo was always one of the top ten sites but hasn’t been able to monetize its traffic for years.
mr_toad 7y ago
> Just monetizing the web traffic 2.5 billions monthly hits at a $1 CPM alone would generate $2.5 million a month in revenue Step 1: Generate 2.5 billion hits Step 2: ??? Step 3: Profit!
wp381640 7y ago
> I suppose if Verizon is taking the tax deduction on an original $1.1 billion purchase by Yahoo Yahoo wrote down almost the entire value of Tumblr before the Verizon acquisition[0] > What kind of business, let alone web business, sells for 1/10th annual revenue? A business that is losing a lot of money and shrinking. Automattic have to invest a lot more than $3M to keep Tumblr alive and turn it around (200 employees) - the total investment isn't just the acquisition cost With the headline figure it might seem like a nobrainer but Automattic could end up spending years investing in a turnaround that never happens [0] https://www.businessinsider.com.au/yahoo-tumblr-write-down-2016-7?r=US&IR=T https://www.businessinsider.com.au/yahoo-tumblr-write-down-2...

by laser 7y ago

jartelt 7y ago

Assuming you want to keep Tumblr running, you are also buying the ~200 employees and the costs of running the site. Assuming the 200 employees cost $100k each (salary + benefits) and you are already at $20M in costs.

laser 7y ago
If I bought Tumblr in a $3 million fire sale, I don't think I'd keep 200 employees on the payroll, but yes, it combined with the tax write-off and infrastructure costs it's reasonable for Yahoo to want to dump it as fast as possible—they could easily be losing $5M a month on it. I'm just shocked there aren't more opportunists in the market that would have bid the price up to at least something resembling reasonable. That being said, even an extremely well-executed turn-around could be 6 months until break-even, which would require potentially upfront $30 million in losses, in which context the sale price is insignificant, and so the question becomes who has web business expertise + $30 million in cash to burn and desire to confidently make a $15-20 million annual profit business a year or two out. Apparently, not many people/companies.
- y_molodtsov 7y ago
  He specifically said they’d continue to employ all of them.
- rjvir 7y ago
  > If I bought Tumblr in a $3 million fire sale, I don't think I'd keep 200 employees on the payroll Keeping most of the 200 employees on payroll may have been a condition of the $3m sale price.
  - laser 7y ago
    Such a condition would definitely explain the price—although that would still be a pretty surprising condition.
- henrikschroder 7y ago
  > it's reasonable for Yahoo to want to dump it Verizon, not Yahoo.

steveklabnik 7y ago

The article with “well below $20 million” was later revised to be “$3 million”; this wasn’t revealed by Fred.

overcast 7y ago

Off topic here, but reading this text blob, would it hurt HN to increase line-height a smidge? Like to ~1.5x? That would be 13pt and SO much easier to digest.

Chyzwar 7y ago
You can do it yourself via Stylus extension, I have solarized dark theme applied.
laser 7y ago
Broke it up into 3 paragraphs now >.<
valar_m 7y ago
If you use Greasemonkey/Tampermonkey, here's a paste of the quick and dirty script I wrote a long time ago to fix the exact issue you're talking about: https://pastebin.com/QJZSEy2D https://pastebin.com/QJZSEy2D It does indeed make HN much easier to read.

nostrademons 7y ago

IMHO Wordpress itself is grossly undervalued. I've done some whole-web analysis and they (including both the open-source project and the hosted service) account for roughly 18% of the web. The volume of content produced on them (in terms of # of words, not # of messages) is greater than on Twitter. If you look at comparables - with Twitter valued at $30B, Reddit at $3B, and Wordpress valued at $1.16B - it's pretty hard to justify those valuation disparities. Sure, it's open-source and non-hosted-by-them Wordpress installs don't really make much money for the company, but you could argue that they actually have more control over the greater Wordpress ecosystem than Reddit does over famously revolt-prone subreddits. Unfortunately, they're private, profitable, and to my knowledge not seeking investment, otherwise I'd buy a slice of them in a heartbeat.

avn2109 7y ago
Another interpretation of your (insightful and valid) comment is that Twitter and Reddit are severely overvalued.
panopticon 7y ago
I think investors like the fact that Twitter and Reddit control all of the user data and (mostly) where and how it's surfaced. The idea is they can somehow monetize this data (e.g., ad revenue). Obviously they haven't been able to do that yet. There's a chance those platforms are very over-valued... but you can see where some people think the golden goose is.
deleted 7y ago
[deleted]
ramphastidae 7y ago
The valuations are fine. Firstly, WordPress is not valued at anything as it is not a private company. You are thinking of Automattic, which is a managed host that owns wordpress.com and makes their money on ads and subscriptions. Their share of and profit from the WordPress ecosystem is much smaller than you think, blogs / websites are commodities at this point, and there is no reason to think there is a relationship between volume of content and valuation. Meanwhile, Twitter and Reddit are massive social networks with millions of daily active users.

deleted 7y ago

[deleted]

mbesto 7y ago

> said on here the other day about adopting a "Berkshire model" This is not the Berkshire model at all. Berkshire buys businesses that have high cash flow models where money can compound over and over, usually in well established businesses that have operational issues that can be optimized for cash flow. > Just monetizing the web traffic 2.5 billions monthly hits at a $1 CPM alone would generate $2.5 million a month in revenue, $30 million annually. That napkin math doesn't take into consideration: - hosting costs - software maintenance cost - sales & marketing required to drive $30M/year - Decrease in traffic due to ads - Ad-blockers > What kind of business, let alone web business, sells for 1/10th annual revenue? Retail does...retail. Hate to break it to you, but businesses aren't bought and sold on revenue (despite what TC tells you). It's usually on a multiple of earnings or discounted free cash flow. Note - it's important to remember that DCF can get real fuzzy and hence why its much easier for media to just revert to "revenue". > Reddit does 6x the page views, but is valued at $3 billion. And Tumblr's valuation was once $1.1B and they couldn't monetize it. How is that comparable a valuable reference point?

lowdose 7y ago
Yep, DCF is all about the multiplier.
Ayesh 7y ago
I run a web service that gets around 10m hits a month, and I serve one popup ad (yuk, I know) per day (or until cookies are cleared). Compared to revenue, hosting cost is next to nothing for sites like Tumblr that serve text/image content. A similar video site would need to spend a ton of money on bandwidth, streaming CDNs, encoding servers, etc. If you get 2.5 million hits a month, it is certainly possible to cover the said selling price of $3m in ads alone in a month.
- home_project123 7y ago
  Could you please email me to discuss a possible revenue addition? home_project123 at protonmail dot com It is non-yukky and does not affect your content/users
- 7y ago

_bxg1 7y ago

Verizon didn't just fail to figure out what to do with Tumblr, it dealt what was nearly a death blow by changing its policy on adult content - one of the platform's biggest remaining pillars of core users. Tumblr doesn't still exist because of its features; it exists because of its communities. Leave it to Verizon to not just starve a golden goose, but shoot it in the head.

IB885588 7y ago
This is exactly what happened. Verizon probably didn't know that most of the traffic they were buying were because of adult content, and then they killed that. I wish they had sold it to Pornhub instead.
- chipotle_coyote 7y ago
  Verizon didn't buy Tumblr. Verizon bought Yahoo/Oath and ended up with Tumblr. It's a very different scenario. It's important to remember that Tumblr never turned a profit; as far as I've been able to determine it never hit the break-even point. And the bottom line is that a giant service that's losing money is worse to own than a tiny service that's losing money. Verizon's attempt to kick out the NSFW parts wasn't simple-mindedness or prudishness, it was a calculated risk that a smaller but SFW Tumblr might be able to at least make enough money to pay for itself. Having said that, it's also important to note that Tumblr still gets a lot of traffic; by most measures it's still in the top 100 most visited sites on the Internet, and gets more traffic than Wordpress.com -- Automattic's closest "competing" product -- does.
  - henrikschroder 7y ago
    > Verizon bought Yahoo/Oath Verizon had ATH - AOL, TechCrunch, Huffington Post, then bought and added yahoO to the group, hence the name. Yes, that is exactly how uninspired these corporate names are.
    - evanelias 7y ago
      Do you have a source for that? I worked there at the time of this unholy merger, and that explanation for the name was never given. From what I recall, Tim Armstrong claimed the name reflected Verizon's promise to do right by AOL and Yahoo, or some other such complete nonsense. Internally, everyone I knew thought it was on par with Tronc for worst rebrand ever.

scarface74 7y ago

Yahoo proved that page views don’t really mean much. Yahoo was always one of the top ten sites but hasn’t been able to monetize its traffic for years.

mr_toad 7y ago

> Just monetizing the web traffic 2.5 billions monthly hits at a $1 CPM alone would generate $2.5 million a month in revenue Step 1: Generate 2.5 billion hits Step 2: ??? Step 3: Profit!

wp381640 7y ago

> I suppose if Verizon is taking the tax deduction on an original $1.1 billion purchase by Yahoo Yahoo wrote down almost the entire value of Tumblr before the Verizon acquisition[0] > What kind of business, let alone web business, sells for 1/10th annual revenue? A business that is losing a lot of money and shrinking. Automattic have to invest a lot more than $3M to keep Tumblr alive and turn it around (200 employees) - the total investment isn't just the acquisition cost With the headline figure it might seem like a nobrainer but Automattic could end up spending years investing in a turnaround that never happens [0] https://www.businessinsider.com.au/yahoo-tumblr-write-down-2016-7?r=US&IR=T https://www.businessinsider.com.au/yahoo-tumblr-write-down-2...