Posted on: 20th May 2013 by: Dokoo
Today, Yahoo finalised a $1.1 Billion (£723 million) agreement to buy New York start-up Tumblr. This is seen as a significant step by Yahoo to help maintain its relevance in online search and social media. Over the past couple of years, Yahoo has seen a decline in its growth, losing further ground behind Google and Facebook.
This acquisition is part of a new strategy by Marissa Mayer, chief executive of Yahoo, to rekindle the company’s fortunes. Announcing the deal, Yahoo said that 'per the agreement and our promise not to screw it up'. Tumble will remain a largely independent entity with David Karp, Tumblr’s 26-year-old founder, remaining chief executive.
Tumblr, was launched in 2007, and it successfully created a short-form social blogging platform that has proved popular among a young audience. However Tumblr has found it a challenge to introduce an effective form of advertising to make the service profitable.
Tumblr is among the 20 most visited websites in the US and it managed to generate solid user growth last year. However this growth has flattened somewhat this year according to web measurement company Alexa. Its young user base is attractive to Yahoo, which is trying to find ways to add to its traditional areas like email and search.
We at Dokoo believe these are exciting times for Yahoo as it attempts to muscle its way back up to the top with Google and Facebook. In theory this deal makes sense. Tumblr has around 300 million monthly unique visitors and 120,000 signups every day. It is one of the fastest-growing media networks in the world. Tumblr is also enjoying an increasingly successful mobile presence with more than half of users logging in daily. Yahoo expects that the marriage between the two companies will grow Yahoo’s audience by 50% and traffic by 20%. As for Tumblr, aside from a nice cash settlement, it is said it will benefit from Yahoo’s personalization technology and search infrastructure thus making it easier and more enjoyable for its users to access content.
If Yahoo and Tumblr can seamlessly integrate effective advertising, this may prove to be a very astute purchase. The top executives at Yahoo will certainly hope this will be case. However this is easier said than done as users are increasingly being put off by intrusive advertising.
Yahoo may have been encouraged by the success of Facebook’s recent purchase of photo sharing platform Instagram. However, time will tell whether Yahoo will experience similar joy or this could turn out to be a clumsy purchase.
Peadar is a project manager @ Dokoo
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