Counterparties: Golden Karp
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Why might Yahoo want to buy Tumblr, as AllThingsD reported last night and Adweek confirmed this morning? Henry Blodget has a couple of ideas. For one thing, he says that â€śYahoo wants to become hip and cool again, and Tumblr is hip and cool.â€ť Tumblr also has a large following in the 18-29 demographic that Yahoo would like to capture (CFO Ken Goldman told a group of investors earlier this week that â€śOne of our challenges is we have had an aging demographic.â€ť) In that way, the move is similar to last yearâ€™s Facebook/Instagram deal, which Ryan McCarthy described as â€śa $1 billion way to make your parentsâ€™ status updates more interesting.â€ť
Blodget also says that Yahoo is looking to become a content distributor, rather than a content producer: hosting a vast number of user-generated selfies, GIFs, and pornography is easier to scale than paying journalists, as Tumblr itself realized last month when it canned its in-house Storyboard journalism team. To Joshua Brustein, the purchase of the 108 million or so Tumblr blogs could be Yahooâ€™s â€śpath back to cultural relevanceâ€ť; it also may build on Mayerâ€™s plan to move Yahoo toward stream-based advertising.
Because kids today donâ€™t think Tumblr sucks (Techcrunch reports that â€ś21% of its audience is under 18, 30% is 18 to 24, and 22% is 25 to 34â€ť), other Silicon Valley companies with aging user demographics, like Facebook and Microsoft, are reported to be interested in bidding. However, Jeff Bercovici reports that the Yahoo talks are â€ślikely to result in an offer as soon as Yahoo CEO Marissa Mayer can get her boardâ€™s approvalâ€ť, and that itâ€™s unlikely anyone else will be given an opportunity to bid.
What will Yahoo do for Tumblr? The site has a young and idealistic founder in 26-year-old David Karp, who has previously expressed resistance to being â€śabsorbed into a behemoth of another company and raided for talent and traffic.â€ť Unfortunately for Karp, Yahoo’s track record in that respect is abysmal. Sam Biddle has a good roundup of the Yahoo acquisition graveyard, including GeoCities ($3.6 billion in 1999), Flickr, and Delicious.
Back in 2011, Tumblr raised a $85 million at an $800 million valuation. Yahooâ€™s $1 billion offer isnâ€™t a big premium over that, but Nicholas Carlson writes that Tumblrâ€™s late-stage investors may have some deal sweeteners, ensuring they get a decent return. Karp may also see an upside to selling to Yahoo: Carlson writes that Mayer is likely to let Tumblr continue being relatively ad-free for the near future. — Shane Ferro and Ryan McCarthy
On to todayâ€™s links:
Morgan Stanley analyst reminds the world he only has a job because investors are dumb – Sam Ro
No, 2013 is not 1999 – Josh Brown
Bill Ackman is investing in a $90 million New York penthouse – WSJ
Legally, Goldman can’t deny it misled an investor — even though a court just threw out claims that it did (Got that?) – Jonathan Weil
“Company that helped Goldman build terrible CDO loses lawsuit over the result” – Matt Levine
And, of course, there are many more links at Counterparties.