Yahoo is buying all the things! Maybe even Tumblr...

Faith Merino · May 17, 2013 · Short URL:

Rumors abound, but can Yahoo afford the hefty price tag?

I kind of love Yahoo’s whole turn-around strategy, which can best be summed up as:


Just days after Yahoo was said to be considering a bid at the hot Internet TV service Hulu, rumor now has it that Yahoo is actually/also in “serious” take-over talks with the top execs of none other than Tumblr.

CEO Marissa Mayer has reportedly been interested in Tumblr since her Google days, where she kept a close eye on the rapid growth of the super trendy mixed-media blogging service/social networking site. Tumblr has proven to be a huge hit with the kids. While only 6% of all adult Internet users frequent Tumblr, among 18- to 29-year-olds, that number jumps to 13%.

And that’s exactly the group that Yahoo wants to bring back to its fold.

“One of our challenges is we have had an aging demographic,” said Yahoo CFO Ken Goldman at JP Morgan’s Global Technology conference earlier this week. “Part of it is going to be just visibility again in making ourselves cool, which we got away from for a couple of years.”

The only thing less cool than being uncool is saying that you want to be cool.

But could a Yahoo/Tumblr deal even feasibly happen? The reality is that as “cool” as Tumblr would be for Yahoo, the company has already raised a good $125 million at a reported valuation of $800 million. Tumblr is also rumored to be raising a large round that would bump its valuation up to $1 billion.

Since Marissa Mayer took the helm at Yahoo, the company has acquired six mobile startups for a grand total of $46 million altogether--with Summly being the priciest at $30 million (this doesn't include Yahoo's most recent acquisitions, Astrid, GoPollGo, Milewise, and Loki. And Ken Goldman even said at the JP Morgan event that future acquisitions would continue to be on the small side. So how likely is Yahoo to spend $1 billion on Tumblr?

Still, the deal would give Yahoo an easy in with one of the hottest social spaces around. Tumblr had 117 million visitors in April and claims to contain some 50.6 billion blog posts from 107.8 million blogs.

Yahoo’s Q1 2013 earnings report revealed higher than expected earnings per share, but a slight drop in revenue. Specifically, the company generated $1.07 billion in revenue excluding traffic acquisition costs (ex-TAC), while analysts were expecting $1.1 billion ex-TAC.

Additionally, non-GAAP income from operations was down to $224 million in Q1 2013, compared to $231 million in Q1 2012.

But on the plus side, EPS beat analysts’ expectations at 38 cents per share, while many were expecting 27 cents per share.

Altogether, Yahoo took home an income of $420 million in the first quarter, an increase of 26% over the same quarter last year.

“I’ve said before that getting the company growing at the rate I’d like to see would take several years,” said CEO Marissa Mayer in the earnings call. “Our long-term success will be gained in a series of sprints.”

Shares were holding steady Friday morning at $26.59 as of this writing. That's up nearly 79% in the last year.

Read more from our "Trends and news" series

More episodes

Related News