Why is Yahoo! buying Tumblr?
CEO Marissa Mayer has to do something to rejuvenate Yahoo! In Internet years, Yahoo! is ancient.. She wants to shed the well-earned image of Yahoo! as a fading Web 1.0 player. Tumblr skews young, and Yahoo! needs young.
But in truth, no one knows for sure why Yahoo! craves Tumblr enough to part with $1.1 billion.
Hollywood screenwriter William Goldman once famously remarked about the entertainment industry: “Nobody knows anything.” It turns out it’s pretty much true of the Internet as well.
The digital landscape is littered with the casualties of cyber-capitalism, confirming evidence of Goldman’s observation, starting with the disastrous merger of AOL and Time Warner, which vaporized an estimated $120 billion in shareholder equity.
MySpace, once the darling of social networking, was bought by media giant News Corp. for $580 million in 2005. It was sold in 2011 for $35 million. Rupert Murdoch, the octogenarian Chairman and CEO of News Corp., took to Twitter to explain what went wrong.
In other words: he doesn’t know. Nobody knows anything. He just ‘screwed up’ with $580 million.
Whatever lessons Robert Murdoch might have learned, he should pass them on to Marissa Meyer.
Announcing Yahoo!’s $1.1 deal with Tumblr, she famously promised not to ‘screw up’ the hot social sharing site.
And well she might. Yahoo itself has an awesome record of screwing up acquisitions. Flickr, the online photo sharing service, seemed to be heading for the big-time when Yahoo acquired it eight years ago. But Yahoo screwed up its potential bonanza, starving Flickr of resources and tangled it in bureaucracy while other photo sharing services like Facebook and Instagram gained traction.
The ghost of Flickr — along with a number of other failed acquisitions like GeoCities, Broadcast.com, and Delicious — must haunt Yahoo!’s chief executive.
“Flickr was awesome once, and it languished. We’re going to make it awesome again,” she has vowed.
She has also promised to avoid those pitfalls with Tumblr. Mayer’s plan is to give Tumblr the independence that Flickr lacked. Appropriately enough for an Internet company, it’s a strategy based on a meme.
“When we look at super-scale acquisitions like eBay-PayPal, Google-YouTube a meme arises,” Mayer said at a press conference after being asked about how she’ll avoid the past mistakes with Flickr. “Those companies have so much momentum, and they often do better when operated independently. Learning from that history is why we made a commitment to operate Tumblr independently.”
So, having captured a rare and exotic bird of the Internet variety, Yahoo!’s first strategic objective is just to keep the precious creature alive in captivity long enough to decide what to do with it.
“Go slow, tread carefully” runs the current advice, turning classical integration strategy on its head.
Don’t get too close. Don’t scare the sweet bird of youth with sudden movements. It might die of shock. And that would be a screw up, not just in Internet terms.