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Thursday, May 30, 2013

Why Tumblr's positive PR is worth $1.1 billion to Yahoo!

Market share consolidation is sought via mergers and acquisitions
PR capacity and value is an intangible asset
By Sam Wright

In 2005, Yahoo! paid a cool $35 million for Flickr, a photo sharing website that was pioneering for its technology, storage space and social features. At the time, the Flickr acquisition was a significant investment for the company. 

It was also something of a jarring mismatch of brands: a youthful, vibrant photo sharing service was swallowed up by a former search giant that was struggling to stay relevant. Flickr was Pluto to Yahoo!’s Jupiter; a drop in the ocean. And in terms of investment, it was quickly sidelined.

At first, users were pleased to see more generous resource allocations for uploads, bankrolled by Yahoo!, of course. Then, Yahoo! started to phase out Flickr logins and tighten up the association between the two companies. Users started getting uncomfortable, and Yahoo! invested next to nothing. In 2008, its original founders quit.

Take 2: Yahoo! and Tumblr

Marissa Meyer, the current CEO at Yahoo!, clearly wants to turn the tables and make Yahoo! relevant to a younger, hipper audience. Tumblr is its fast-track passport to social success - or so Meyer will be hoping. The $1.1 billion Yahoo! will stump up for Tumblr represents one fifth of the company’s cash, and it trumps the price Facebook paid for Instagram too. CEO David Karp will bank several million dollars, aged just 26; it may not be a Zuckerberg fortune, but it still proves Karp had something Yahoo desperately needed: a hip persona.

Yahoo! will be hoping that its acquisition of Tumblr is a positive PR move in an uncertain, fast-moving world of social media, elevating its profile among teens and twentysomethings, and giving the ageing brand a youthful outlook on life. But Meyer, who was previously known for her work at Google, could have a hard time encouraging the kind of free-thinking, risk-taking management that has brought services like Facebook and Tumblr to fruition.

The cost of good PR

$1.1 billion does seem like a lot to pay when a perfectly good public affairs account manager could have been enlisted for a fraction of the price. But for a company like Yahoo!, it’s almost always easier to buy good publicity and ask questions later.

Sceptics are concerned about Tumblr’s future. Karp managed to develop an unintrusive ad network which Yahoo! could now infiltrate and exploit. And the M-word - Myspace - has been bandied around, too. Yahoo! could be the embarrassing uncle tasked with fitting in with ‘the kids’. Writing for Cnet, Dan Farber said Tumblr would be a “slog” for Yahoo!, at least as far as revenue generation is concerned. Perhaps the company doesn’t care: it just wants to become relevant, and fast.

Tumblr may be part of a bigger family now, and Yahoo! may simultaneously be basking in the positive PR of the takeover bid. The question is whether Tumblr can be woven into the Yahoo! ecosystem in a beneficial way, or whether - like Myspace and, to some extent, Flickr - Tumblr will soon become a ghost town.

About the author: Sam Wright is a freelance writer that doesn't (yet) have a Tumblr.

* Image license: Fabiane Niemeyer ;CC BY-SA 2.0