February 18, 2015

Almost two years after acquisition, Yahoo CEO praises Tumblr

Yahoo's acquisition of Tumblr in 2013 for $1.1 billion is a touchstone deal we've discussed on this blog before. Almost two years since the purchase was announced, Yahoo CEO Marissa Mayer is singing the praises of the buy, describing the blogging platform as the fastest-growing social media platform, overtaking Instagram this year. At the time of the acquisition, many scratched their heads at the deal, wondering exactly how Yahoo would implement the Tumblr platform relative to its existing services. 

However, it seems to have paid off. In a conversation with investors and media, Mayer said that Tumblr would be a centerpiece to a more socially-focused strategy moving forward. In the past, Yahoo has suffered from declining traffic and a less striking public profile than its early tech competitors like AOL and Google. In the years since the dot-com boom, social networks like Facebook and Twitter have emerged as industry giants, while Yahoo lagged behind with a combination of media content, email service and search engine features. 

With the acquisition of Tumblr, however, Yahoo might have a window to bigger and better prospects in the coming years. Google alum Mayer was seen as a game-changing choice when she was hired, and has made steady progress for Yahoo with an aggressive series of acquisitions. Tumblr is, in many ways, the jewel in the Yahoo crown with by far the greatest visibility of all its properties. 

Forbes seemed skeptical of Mayer's claims that Tumblr had outpaced Instagram as the fastest-growing social network in the tech sphere. A report claims the research was based on third-party information that might not give a full picture of the two platforms' actual growth.

"Given Tumblr and Yahoo's previous issues with third-party data, investors may cast a skeptical eye with regards to Tumblr overtaking Instagram," writes Ryan Mac on the Forbes site. "What is interesting, however, is Mayer's continued confidence in the blogging network, which many critics have derided time and time again as a waste of money."

Nevertheless, Tumblr continues to build its user base year over year. Active users, Mayer said, have grown 120 percent over the last year while total registered accounts (including those who just browse without maintaining a blog) rose from 420 million to 460 million. This shows that users who have signed up for profiles have begun using the platform more actively, sharing and interacting with the Tumblr community. 

In total, Mayer claims Tumblr stands to earn $100 million in revenue this year, a figure that has been touted several times in recent months. Her time at the helm of Yahoo continues to be beset by "activist investors" who have urged the company to consider a merger with AOL, and decried her decision to purchase a major stake in Chinese ecommerce site Alibaba. These and other suggestions place little confidence in her direction, with some threatening to challenge her leadership if the course isn't changed. Fast Company reports the peculiar statistic that female CEOs are more than 30 percent more likely to be pushed out by activist investors than men. 

Since its inception, Yahoo's Tumblr acquisition strategy has inspired doubt among analysts and worry among shareholders. Despite naysayers, Mayer's claims seem to indicate that the acquisition could be instrumental in repositioning the company in the future, reaching a younger demographic and earning the attention. 

One thing is for certain: We're talking about Yahoo. In that respect, the Tumblr acquisition may already have paid for itself.