The saying "Go Big or Go Home" was clearly taken to heart this weekend for Yahoo CEO Marissa Mayer, as was evident in the company's $1.1 billion cash deal to acquire the blogging platform Tumblr. As part of the deal, current Tumblr CEO David Karp will stay on and run Tumblr, which will remain an independent company, according to the Wall Street Journal.
When Mayer took over Yahoo, one of her goals was to make the company brand appeal to a younger audience. Some might consider the $1.1 billion price tag overly steep for a company that did $15 million in revenue last year and is expected to do $100 million in 2013. In fact, I’ve seen some articles calling this a desperation move for Yahoo, and I completely disagree with that statement.
If Yahoo’s goal is to attract a younger audience, then Mayer hit a bulls-eye with Tumblr as the majority of the users fall into the 18-25 demographic. For those who aren’t familiar with Tumblr, it’s a cross between blogging, Facebook, Pinning and Tweeting and lets users send out messages to their community without a character limit. It’s the tool of the younger generation. My 20-year-old daughter Ashley spends more time on Tumblr than Facebook, Pintrest or Twitter. I asked her just this morning if she could keep only one of these, which would it be, and she said without a doubt it would be Tumblr.
The challenge for Yahoo and Mayer is to not screw this up by "Yahoo-ing" it, which means leaving it alone and slowly trying to introduce other Yahoo tools to that audience. I was discussing the acquisition with Ashley and she didn’t really even know what Yahoo is. When I explained, she just said, "well, I don’t do any Yahoo." Ashley has many wonderful qualities that make her unique, but when it comes to social media usage, she uses what people in her age group use, and right now that’s Tumblr. One of the areas in which Tumblr has improved over the past year or so is the mobile interface. This helps Yahoo with its other goal, which is to make the company more mobile-centric as well.
So, did Yahoo pay too much? Perhaps, but I’ve always felt that if an acquisition is a good one, you can’t pay too much. If it’s a bad acquisition, no matter how little you pay, it’s still a waste of money. Given that Yahoo was working from a position of significant weakness, it had to do something bold, and Tumblr was the best available acquisition it could have made to improve its mobile relevancy. More importantly, the deal will improve its relevancy with an audience that previously had no idea who Yahoo is.
This wasn’t a Hail Mary by any stretch. Mayer had previously told employees they couldn’t go home to work, and now she’s going big.