Is Hulu Really Worth 45% Less Than Tumblr?

Now that Yahoo CEO Marissa Mayer has Tumblr in the bag for a cool $1.1 billion, AllThingsD reports that she may buy Hulu for between $600 million and $800 million. Considering that Hulu is reported to have brought in nearly $700 million last year (and has 4 million paying subscribers) and considering that Tumblr is said to have brought in an underwhelming $13 million in ad revenue, those numbers side by side are kind of wild, aren't they? Is Hulu really worth up to 45 percent less than Tumblr? Isn't online video the one digital area where traditional advertisers are truly warming up to? Isn't it possible that Tumblr is simply social media's flavor of the month? "It doesn't make a lot of sense," said Nate Elliott, social media analyst for Forrester Research. "There's a lack of rationality in any of it." Elliott called Tumblr's huge monthly traffic numbers —64 million, per Quantcast most-recent stats, 300 million per Yahoo—"a mirage," while stating that the site's 108 million blogs attract a higher number of casual visitors than true devotees. Also, he said, Tumblr's ad prowess is unproven. "And there's enormous value to marketers on Hulu," Elliott said. "It boggles the mind." Brian Wieser, senior analyst for Pivotal Research Group, had a vastly different take on the price tags, suggesting there weren't two separate $1 billion paths for Yahoo to "get young"—only one, Tumblr. That market leverage drove CEO David Karp's asking price up in a way not currently afforded to Hulu, he said. "Is a good nanny worth less because she makes less money than people in other professions?" Wieser asked. "Of course not. But different services and assets have different price points. It is as simple as that. With Tumblr, you pay what you pay because it's worth having that asset, while preventing your competitors from getting it." Marketing players also differed in opinion about whether or not the valuations were out of whack. "Tumblr should be valued higher than Hulu," contended David Clark, marketing vp at global strategy firm SDL. "Tumblr content is user-generated, unique and differentiated. Much of Hulu's content can be had through other channels and is not differentiated. The opportunity for Hulu is to become more social and therefore more differentiated. Tumblr would be a great starting point for this." Sveta Doucet, chief strategy officer at M&C Saatchi, offered a more nuanced perspective. "Yes, Hulu has a clear business model in place, $695 million in revenue in the past year, [and] could quickly offer a financial boost to Yahoo and a steady revenue stream," she said. "However, the video-streaming market is mature from Netflix to Google to Amazon—and Hulu has been on sale since [early spring]. Tumblr enables Yahoo to innovate, attract a new audience and be better versed in the social and mobile space…all the things necessary to be a Web 3.0 company. Hulu simply provides the stability. Clearly, the majority value rests in the player that will enable Yahoo to transform itself through the actual platform offering, not just the financial support." Paran Johar, CEO of the Mobile Media Summit, put it this way: "The simplest [method of evaluating] the two companies is by audience and reach. Hulu certainly has more premium content than Tumblr. However, that content is concentrated among fewer producers, which inherently is more risky. Tumblr—though diversified broader with its producer base—has less video, which is typically valued higher by advertisers." Johar suggested that Tumblr's price tag—versus what's being bandied about for Hulu—represents a victory for social media ad sellers. "Ultimately, it comes down to the technology," he said, "and clearly Yahoo is valuing social media more than video."

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Is Hulu Really Worth 45% Less Than Tumblr?

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Christopher Heine

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