Yahoo! Inc. (NASDAQ:YHOO) announced that it would pay $1.1 billion for blogging and image-sharing site Tumblr in a move that has increased shares in the company $.25, but this move is being viewed with skepticism by some analysts.
Yahoo acknowledged its previous bad decisions in acquiring start-ups in a vow “not to screw up” the deal with Tumblr. Yahoo hopes the deal will increase its audience 50 percent to 1 billion monthly visitors, and help them gain a hip factor that the Internet giant has not seen in years. Yahoo wants this deal to be similar to Google’s (NASDAQ:GOOG) acquisition of YouTube and eBay’s (NASDAQ:EBAY) of PayPal — and, of course, not like its own botched purchase of Flickr.
Yahoo Chief Executive Officer Marissa Mayer and Tumblr CEO David Karp both promised the popular blogging site would not experience significant changes for users. But technology analyst Johnathan Yarmis said the deal “reeks of opportunity meets desperation,” and some Tumblr users have already taken to social media to complain.
One advantage Yahoo believes Tumblr will bring them is a younger audience, which will in turn be appealing to advertisers. Many top global companies already use Tumblr to advertise to a young audience. Mayer is optimistic about the deal, saying, “Tumblr is fast and nimble. We want to get the core of Yahoo to move fast. We can learn a lot from that.”
Tumblr is a wildly popular site for young adults, who find it appealing that their parents have not yet infiltrated Tumblr the way many adults have Facebook (NASDAQ:FB). Tumblr offers an intense amount of engagement between users and large communities, so it is hoped that users won’t ditch the site despite the new ads.
Yahoo is still haunted by its mismanagement of the photo-sharing site Flickr, which was one of the most popular sites for photographers before Yahoo failed to improve social and mobile features the site needed to compete with Instagram and Facebook, and many users abandoned their accounts.
While many are on the fence about Yahoo acquiring Tumblr, most can agree that the price tag was too high. Tumblr made $13 million in revenue last year, so the $1.1 billion Yahoo paid for the site seems unreasonable to some analysts. It remains to be seen whether Tumblr can give Yahoo the hip factor it needs, or if Yahoo is going to ruin yet another popular website.
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