So, this week there seemed to be a lot of coverage in the news about Tumblr. In case you didn’t hear, Yahoo just spent large amount of money ($1.1 Billion) to acquire the company. Our guess is that most of you have at least heard of it and assumed that it was just another social media site of some sort. Well, we thought it would be great to discuss it on our blog today. We are going to go over some of the basics and maybe try to better understand why Yahoo just had to have it.
Tumblr has been around awhile in terms of websites – 2007. It was founded by a young guy named David Karp who dropped out of high school to found the company. In its most basic terms it is a social media site that you can join for free and “share your creativity with the world”. There are roughly 1 billion users on the site and they often describe the site as a hub for “user-generated content”. One of the most popular uses of the site is for blogging but it sounds like people use it as a way to post a lot of photos as well.
So, why in the world would Yahoo buy this company and spend so much on it? Well, they think they can make money with it obviously. And that means they think they can get advertising dollars.
According to an article on Reuters, Yahoo’s numbers have been slipping. Basically they are competing against Google in the search world and they are losing. Yahoo feels that by having access to Tumblr’s many users they can get more advertising out there and make a good return on their investment. It will be Yahoo’s way of advertising in the social media world.
So, was it worth the sticker price? We tend to think no but our opinion is that generally social media and in particular social media advertising is overvalued. Part of the reason that social media is so popular and that it has done so well is because it is a world driven by users and not advertisers. (We as marketers even think that.) Our concern is that all of these social media sites (Facebook, LinkedIn, etc.) are at risk of really screwing this up by putting too many ads on their sites. And companies that are trying to piggyback off the social media sites may find themselves to be very disappointed. Sorry, Yahoo.
Now, we can understand that Yahoo had to try something – competing against Google has got be so hard. But according to the same article on Reuters, Tumblr has never posted a profit. Seems like a risky investment. It will be interesting to see how this (and all of the other social media advertising ventures) shake out.