As the social media industry matures, those that find a sustainable business model rise to the top, others fall by the wayside. According to a NY Mag Boom Brands feature, the future was not looking good for Tumblr — that is, until Yahoo! acquired the blogging platform in May.
The article paints a picture of a six year old startup in its sixth year that hadn’t yet figured out how to capitalize on its status as one of the top 20 most trafficked websites in the US. Tumblr was running out of money and if it took on more investor money, it would have likely meant Founder and CEO David Karp giving up a considerable amount of equity.
Author Molly Young wrote, “To stay afloat without selling, it would have needed a sixth round of funding.” Young goes on to quote a source close to the deal saying, “It was the biggest game of chicken I’ve ever seen.”
Unlikely though it might seem, the Yahoo! acquisition was successful — at least as a financial transaction. However, the result has been a huge change in the Tumblr culture. The Boom Brands article quoted a former employee saying, It got way less fun. Over time, they hired more HR people and all these policies came into place.”
This is hardly unheard of for startups that get eaten up by a bigger company with shareholders to which it is beholden. While Karp had long refused to advertise on Tumblr, since the Yahoo! acquisition, Karp has given in to the ad model and thinks it will make Tumblr better.
Still, Karp doesn’t seem particularly worried about profitability. Instead he is quoted in the Boom Brand’s feature saying, “If the media network supports the creators, then the creators will make that their home. They’ll build an audience, and more creators will show up to reach that audience.” Herein lies the value of Tumblr, Karp tells Boom Brands, making hopeful comparisons to YouTube.
Now that Tumblr is an advertising platform and those creatives have become its product, the question is whether or not Yahoo! will leverage the site’s popularity better than with previous acquisitions.
“There is also the not irrelevant matter of Yahoo’s rotten acquisitions record, which is cluttered with duds like Geocities and Broadcast.com—both sold for billions, both now ghosts that simply redirect to Yahoo,” Young wrote.