CITY FOCUS: Yahoo! in tactical acquisition of blogging site Tumblr as chief promises 'not to screw it up'
Marissa Mayer, the chief executive of Yahoo!, yesterday made her boldest move yet to restore the fallen star of the dotcom era to its former glory.
In its first major gamble on her watch, the company announced a major deal – the £723million takeover of blogging site Tumblr, which is run by 26-year-old founder David Karp – making him a very rich young man.
Since the unstoppable rise of Google, Yahoo! has seen its hold on the internet search market seriously weakened.
Snapped up: Yahoo!’s chief executive Marissa Mayer has promised not to ‘screw up’ her new acquisition
After missing the bus on a number of innovations, from social media to the explosion of mobile and tablet computers, the company has been in decline, marred by boardroom in-fighting.
Yahoo! appointed Mayer, formerly a Google executive, to the top job last year in a desperate attempt to breathe life into the business.
So far it appears to be is working, with shares up by 70 per cent since she took control in July.
More... Facebook's fight-back starts here as the social media behemoth outlines plans to keep monetising Tech start-ups set to benefit from £440m investment boost Do you shop online? Get cashback with every spendThe question now is whether her purchase of Tumblr is an astute move to win over a younger age group, or an expensive act of folly. Tumblr allows users to create simple blogs and to share words, pictures and video.
During its six-year existence the site has grown into a global online phenomenon.
As well as attracting 300million users a month, around 120,000 blogs are created every day. When joined with Yahoo! the combined entity will have more than 1billion users. But despite the impressive figures, Tumblr made revenues of just £8.5million last year.
Even though it is estimated this could rise to £65.7million this year, Yahoo! is not buying Tumblr for its financial performance.
What it is buying is the audience and demographic of the site. The vast majority of Tumblr’s users are aged 18-24, an audience Yahoo! desperately wants to attract.
‘One of our challenges is we have had an ageing demographic,’ Yahoo!’s finance director Ken Goldman told a technology conference last week. He added that Yahoo! needed to be ‘cool again’.
The company’s desire to be seen as hip and trendy even extended to the unorthodox language it used in its announcement of the deal. Mayer wrote on her blog: ‘I’m delighted to announce that we’ve reached an agreement to acquire Tumblr! We promise not to screw it up.’
In efforts to avoid doing just that, the company has announced that it will take a ‘hands off’ approach to its newest arrival.
Founder Karp, who stands to make hundreds of millions from the buyout, will remain at the company and continue running it.
Mayer insisted she wanted to ‘let Tumblr be Tumblr’.
That said, she will still want to drive revenues – and is already considering ways of integrating adverts into the blogs.
But there is one major factor that may drive advertisers away from targeting Tumblr’s mammoth following – adult material.
A very large amount of Tumblr’s content is pornographic and labelled ‘not safe for work’.
When asked about her approach to this delicate issue, Mayer replied that ‘the width and breadth of content on Tumblr is what’s exciting and has allowed it to reach more users’.
But some bloggers are already deserting Tumblr in favour of its main rival WordPress.
An estimated 72,000 Tumblr blogs were transferred to WordPress in just one hour after news of the deal emerged.
While the deal is unlikely to be a game-changing event that catapults Yahoo! to its former status, it signals that Mayer is willing to take risks. Securing one seventh of the world’s population as potential customers is a good start.