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> In the end Tumblr won’t see a bigger exit because they didn’t prove they could monetize their massive traffic before time (and money) ran out. Instagram had

> In the end Tumblr won’t see a bigger exit because they didn’t prove they could monetize their massive traffic before time (and money) ran out. Instagram had $0 in revenue when they were acquired for $1 billion in cash/stock. The price paid in that instance was for potential, and it's likely to be the same in the case of Tumblr.

tuananh 13y ago
I think the diffs are Instagram hasn't attempted to monetize so their potential is unknown; while Tumblr already did and it doesn't look very bright.
- hkmurakami 13y ago
  Also, mobile-based photosharing was deemed a "major threat" to Facebook's existence and relevance, whereas Tumblr is a much less mobile-centric and is deemed more of an "asset acquisition" and doesn't carry the urgency that Instagram carried for FB.
  - onedev 13y ago
    Exactly this. Buying Instagram was a preventive measure, and it seemed to work out really really well for both parties involved. Buying Tumblr though? It's not so much of a preventive measure. It would be more for the integration potential and userbase than anything else and I think most people are saying Tumblr lacks potential as a standalone service. However, if it could help augment the Yahoo brand then it could potentially be worth it for Yahoo. I think there are multiple angles to look at, and we shouldn't focus too much on the price as much as the motivations behind such a deal and what the outcome could potentially be. Perhaps Yahoo could build services around Tumblr? Or maybe they'd elect to integrate Tumblr into Yahoo itself. Or perhaps use it add to their portfolio of companies to strengthen the Yahoo brand. I could also see a Yahoo ecosystem consisting of a tag-team of Flickr, Tumblr, and their News aggregations. So the question remains; what is their strategic motivation for Tumblr?
    - eclipticplane 13y ago
      On the flip side, we have other successful media conglomerate companies that let their media acquisitions remain semi-independent. Notably AOL and Advanced Publications/Condé Naste. Yahoo made it crystal clear that they own Flickr, for example. Do AOL or Advanced Publication make it clear they own Huffington Post, Tech Crunch, or Reddit? Not really. Sure, it's in black and white on their 'about' pages or via Wikipedia, but they generally had a hands-off approach. Huffpo and Reddit are still growing; Flickr not so much (except in some demographics or countries). Maybe Yahoo will keep a hands off approach. That also helps create a firewall for Yahoo stockholders who might balk at Tumblr's questionable content.
  - goronbjorn 13y ago
    I would argue that, in this case, long term irrelevance is a "major threat" to Yahoo!'s existence, and this is one of few ways to circumvent that. There's going to be the same seemingly irrational price pinned on this acquisition because it's a long term life or death situation.
    - hkmurakami 13y ago
      Sure, but "Tumblr" is not an existential threat to Yahoo!. That kind of dynamic where you're such a pain in the ass to some big company that they have to buy you to maintain their status quo business as usual is one of the best ways to get acquired. When you don't have that dynamic, Yahoo! doesn't have to buy Tumblr. Maybe they have to buy something but it doesn't have to be Tumblr and it doesn't have to be now, right this moment.
      - justincormack 13y ago
        Irrelevance is the existential threat. At that point buying anything that people like and use becomes valid.
- marcamillion 13y ago
  Lest we forget, the early days of Google monetization attempts were relatively poor - before AdSense came along. Heck, other monetization attempts have been poor ever since too....soo....
nwh 13y ago
We should probably avoid using Instagram in examples. It's such an insane outlier that it doesn't make sense to compare anything to it.
- pseut 13y ago
  So is Tumblr. So we're left with poor comparisons.
- BuddhaSource 13y ago
  Tumblr is very similar to Instagram and should be considered as example. The overlap between Instagram and Tumblr users in the early days is huge. Both are targeted at young crowd with similar taste graph. As a Platform Tumblr has great potential in spreading the content. Reblogs works just like retweet and a good content can potentially go viral. That also includes rebloging of promotional content. I personally feel people who don't use Tumblr see this as yet another blog site. They have the best mobile app to post pics, stories, videos & even audio. After Instagram, I am slowly getting addicted to Tumblr's mobile app.
  - mistircek 13y ago
    I think Instagram acquisition and this are not similar cases. Instagram was a direct competitor of a core product of Facebook: Photo Sharing while there's no such competition in Tumblr case.
deleted 13y ago
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mtgx 13y ago
I don't remember where I heard this, but it was something along the lines "it's better to have $0 revenue, than to have $100 revenue (or some other low number you want to use)". Because at $0, you could sell the company on potential, while at $100 you're making it seem like a very poor business. If Tumblr wasn't making any money at all, maybe they could've sold it for $3 billion, but since they already have a monetization plan in place, and aren't making that much money with it, the expectations for monetization are a lot lower now, and the company is worth less.
- notahacker 13y ago
  I recall seeing this as well, and it's a sad indictment of SV management if it's true that companies estimate higher revenue potential for potential acquisitions with a pitch of "we've got pageviews you can always stick ads on" than "we've gradually started to monetise at a low CPM relying mainly on excess inventory ads from a third party platform due to a limited sales team, but CTRs are good and user attrition near nonexistent and our one premium brand advertiser is very happy, so how much more revenue do you think you'll make?" It's like investing more in the "idea guy" than the good team with a developing product whose traction isn't stratospheric yet.

tuananh 13y ago

I think the diffs are Instagram hasn't attempted to monetize so their potential is unknown; while Tumblr already did and it doesn't look very bright.

hkmurakami 13y ago
Also, mobile-based photosharing was deemed a "major threat" to Facebook's existence and relevance, whereas Tumblr is a much less mobile-centric and is deemed more of an "asset acquisition" and doesn't carry the urgency that Instagram carried for FB.
- onedev 13y ago
  Exactly this. Buying Instagram was a preventive measure, and it seemed to work out really really well for both parties involved. Buying Tumblr though? It's not so much of a preventive measure. It would be more for the integration potential and userbase than anything else and I think most people are saying Tumblr lacks potential as a standalone service. However, if it could help augment the Yahoo brand then it could potentially be worth it for Yahoo. I think there are multiple angles to look at, and we shouldn't focus too much on the price as much as the motivations behind such a deal and what the outcome could potentially be. Perhaps Yahoo could build services around Tumblr? Or maybe they'd elect to integrate Tumblr into Yahoo itself. Or perhaps use it add to their portfolio of companies to strengthen the Yahoo brand. I could also see a Yahoo ecosystem consisting of a tag-team of Flickr, Tumblr, and their News aggregations. So the question remains; what is their strategic motivation for Tumblr?
  - eclipticplane 13y ago
    On the flip side, we have other successful media conglomerate companies that let their media acquisitions remain semi-independent. Notably AOL and Advanced Publications/Condé Naste. Yahoo made it crystal clear that they own Flickr, for example. Do AOL or Advanced Publication make it clear they own Huffington Post, Tech Crunch, or Reddit? Not really. Sure, it's in black and white on their 'about' pages or via Wikipedia, but they generally had a hands-off approach. Huffpo and Reddit are still growing; Flickr not so much (except in some demographics or countries). Maybe Yahoo will keep a hands off approach. That also helps create a firewall for Yahoo stockholders who might balk at Tumblr's questionable content.
- goronbjorn 13y ago
  I would argue that, in this case, long term irrelevance is a "major threat" to Yahoo!'s existence, and this is one of few ways to circumvent that. There's going to be the same seemingly irrational price pinned on this acquisition because it's a long term life or death situation.
  - hkmurakami 13y ago
    Sure, but "Tumblr" is not an existential threat to Yahoo!. That kind of dynamic where you're such a pain in the ass to some big company that they have to buy you to maintain their status quo business as usual is one of the best ways to get acquired. When you don't have that dynamic, Yahoo! doesn't have to buy Tumblr. Maybe they have to buy something but it doesn't have to be Tumblr and it doesn't have to be now, right this moment.
    - justincormack 13y ago
      Irrelevance is the existential threat. At that point buying anything that people like and use becomes valid.
marcamillion 13y ago
Lest we forget, the early days of Google monetization attempts were relatively poor - before AdSense came along. Heck, other monetization attempts have been poor ever since too....soo....

nwh 13y ago

We should probably avoid using Instagram in examples. It's such an insane outlier that it doesn't make sense to compare anything to it.

pseut 13y ago
So is Tumblr. So we're left with poor comparisons.
BuddhaSource 13y ago
Tumblr is very similar to Instagram and should be considered as example. The overlap between Instagram and Tumblr users in the early days is huge. Both are targeted at young crowd with similar taste graph. As a Platform Tumblr has great potential in spreading the content. Reblogs works just like retweet and a good content can potentially go viral. That also includes rebloging of promotional content. I personally feel people who don't use Tumblr see this as yet another blog site. They have the best mobile app to post pics, stories, videos & even audio. After Instagram, I am slowly getting addicted to Tumblr's mobile app.
- mistircek 13y ago
  I think Instagram acquisition and this are not similar cases. Instagram was a direct competitor of a core product of Facebook: Photo Sharing while there's no such competition in Tumblr case.

deleted 13y ago

[deleted]

mtgx 13y ago

I don't remember where I heard this, but it was something along the lines "it's better to have $0 revenue, than to have $100 revenue (or some other low number you want to use)". Because at $0, you could sell the company on potential, while at $100 you're making it seem like a very poor business. If Tumblr wasn't making any money at all, maybe they could've sold it for $3 billion, but since they already have a monetization plan in place, and aren't making that much money with it, the expectations for monetization are a lot lower now, and the company is worth less.

notahacker 13y ago
I recall seeing this as well, and it's a sad indictment of SV management if it's true that companies estimate higher revenue potential for potential acquisitions with a pitch of "we've got pageviews you can always stick ads on" than "we've gradually started to monetise at a low CPM relying mainly on excess inventory ads from a third party platform due to a limited sales team, but CTRs are good and user attrition near nonexistent and our one premium brand advertiser is very happy, so how much more revenue do you think you'll make?" It's like investing more in the "idea guy" than the good team with a developing product whose traction isn't stratospheric yet.