Yahoo Board Approves a $1.1B Pricetag For Tumblr

TechCrunch reports that Yahoo's string of acquisitions may soon include Tumblr: "The Wall Street Journal is now reporting via Twitter that the rumored $1.1 billion cash acquisition deal for social blogging site Tumblr has been approved by Yahoo’s board of directors. The Tumblr acquisition was rumored last week, with a price tag reportedly north of $1 billion, which appears to be accurate if the WSJ’s sources are correct." The article notes, too, that "Yahoo had only $1.2 billion cash on hand as of its most recent quarterly earnings, which makes an all-cash offer for Tumblr a lot more of a stretch than it would be for someone like Apple, or even Facebook, which acquired Instagram for $1 billion in a mix of both cash and stock."

Comments

Strange

[XPeter]

They could've bought YouPorn for a lot less.

Re:Strange

[popo]

Not strange at all. Marissa Mayer isn't capable of doing much besides making overpriced acquisitions and hires.

Here's (yet another) social blogging platform with no clear revenue model.

Re:Strange

[gweihir]

Current stock prices are not a predictor for the future. Well understood by anybody that cared to find out.

Re:Strange

[Jherek Carnelian]

+1

I remember laughing my ass off a while back when one of the CEOs in the long line of CEOs at HP said that the stock market is an objective measure of a company's performance. That was a little bit before the dotcom crash IIRC.

Re:Strange

[meta-monkey]

I am fascinated by your ideas, and would like to subscribe to your newsletter.

Re:Strange

[Colonel Korn]

Yahoo is also sitting in a nice pile of cash 4 bil i think.

RTFS. Yahoo has $1.2B on hand and are commiting 92% of that on this purchase.

Re:Strange

[David Gerard]

"We've received your test reports. Your drug intake is well below industry standards. Here's some techno CDs, remedy this immediately."

Re:Strange

[Jafafa Hots]

The only problem with that scenario is that it was Yahoo that bought it.

Which means Tumblr will go the way of Flickr. It will be milked and ignored until it's about as dated as black and white TV.

Re:Strange

[rtb61]

I really hope you don't think management should take credit for a price rise following a price drop and a failed buyout and no perceived future, no, surely you wouldn't do that. Neither would you take credit for any revenue increases that were simply inflationary or even worse bought in. That would be really really be blonde dumb. Better POE ratios and improvements in the value of assets but please not "I'VE GOT PUPPIES, LOTS AND LOTS OF PUPPIES". You might impress the non-investor but those with a bit more nous are going to look on you as the fool. That puppies thing, nobody said much at the time because it was just so, so, ???!!! seriously that was a business plan, puppies.

Re:Strange

[hairyfeet]

I think its pretty obvious why they want to sell, they lost 12 million bucks last year and there really is no way to monetize the users without them all just leaving. That is the whole problem with all this "social" aimed crap in a nutshell, any attempts to monetize them will result in a shittier experience and the users walking away.

But yeah opportunity cost is a good way of looking at it, if these companies buy one too many stupid companies when that smart company that might actually be a good fit comes along they may either be short of capital or the board will be seriously reluctant to spend the money in light of previous failures. I mean if a perfect fit for HP came along that cost say 4 billion how likely do you think the board will be to bite when they've had to write off over 10 billion from previous deals? And this one is insanely stupid, spending 92% of their cash on a single company that hasn't even turned a profit yet?

if I didn't know better I'd be wondering if this CEO is a plant designed to lower the value thus making it easier to buy Yahoo out, but sadly more likely just another incompetent rich CEO that will make a ton of money no matter how stupidly or badly they do their job. The rich get richer is one of the few constants in the universe it seems.

Re:Strange

[evilRhino]

While we like to mock CEOs, at the end of the day they got to where they are by being good at what they do...

This is a false premise. It is just as likely that they have gotten where they are by social acumen, and have no idea what they are doing.

Let's see

[Intrepid imaginaut]

From wiki: Tumblr made $13 million in revenue in 2012 and hopes to make $100 million in 2013. So far, Tumblr has taken $125 million in funding from its backers. Tumblr reportedly spent $25 million to fund operations last year.

So it's making a loss of $12 million a year and yahoo is willing to fork over $1.1 billion on the hope that it might actually make $100 million this year?

Interesting!

Re: Let's see

[alen]

With these numbers it's worth $10 billion

You have to value it in eye balls

Re: Let's see

[Intrepid imaginaut]

As soon as I can buy my dinner with a sack of eyeballs that's just what I'll do.

Re:Let's see

[alexander_686]

So, to reorder your numbers a bit,

100m in projected revenue / 40m in cost of goods this year = 60m in profits. (40m is from wiki's original source, numbers are projected, so....)
1.1b market cap / 60m profit = Price/Earnings ratio of 18.
  P/E ratio for the S&P is 14.

It looks like it has high growth, that would push the numbers up. Huge risk / numbers are projections / I am doing the numbers on the fly without all of the accoutning number - would push the numbers down.

Re:Let's see

[meta-monkey]

Traditional stock valuation methods kind of assume your company isn't a fad that could implode in a heartbeat. There's nothing to think Tumblr has survivability better than say, MySpace. Yes, I can see paying a billion for something that generates 100 million a year...if there's a good reason to think that asset will last more than 10 years. Free-to-use websites that generate 100 million a year for more than a decade are unicorns.

Re:Let's see

[Colonel Korn]

So, to reorder your numbers a bit,

100m in projected revenue / 40m in cost of goods this year = 60m in profits. (40m is from wiki's original source, numbers are projected, so....)
1.1b market cap / 60m profit = Price/Earnings ratio of 18.

  P/E ratio for the S&P is 14.

It looks like it has high growth, that would push the numbers up. Huge risk / numbers are projections / I am doing the numbers on the fly without all of the accoutning number - would push the numbers down.

Ah yes, we should always base P/E ratios on the "hoped for" earnings over the next year, especially when they're about an order of magnitude higher than the real world numbers from right now.

What a scam

[arcite]

Must be nice to run a multi-billion dollar corporation that makes barely any profit and spend money like a drunken sailor.

Re:What a scam

[fustakrakich]

Who cares why? It's a game of roulette.

Re:What a scam

[IANAAC]

Who cares why? It's a game of roulette.

The reason our economy is fucked, distilled in one sentence.

"Social" is a lose

[Animats]

Despite all the noise, almost nobody is making money in "social". Even Facebook isn't very profitable, despite its size. The business strategy in "social" seems to be to give the service away for a few years, build a following, then crank up the density of ads until the users get fed up. Worked for Myspace, right?

Facebook traffic peaked about a year ago. Twitter is now exploring the user's threshold of pain with "sponsored tweets". This is robocalling in another form.

Basic truth: ads with search results are useful to users and effective for advertisers, because they're presented when the user is actively looking for something relevant. Ads on "social" are merely annoying because the user is looking at what their friends are doing.

Something stinks here

[randomErr]

A company that has $13 million in revenue in 2012 and hopes to only make $100 million in 2013 is purchased for 1.1 billion? This smells of a multi-level pump and dump scheme.

I will bet what will happen in the next 18 months is: Yahoo buy's out Tumblr. Tumblr's CEO sells all his stock Monday morning and get insanely rich. The new tYahoo company goes bankrupt by the end of the year. Microsoft or Bill Gates himself will swoop in and FINALLY by buy Yahoo making the current CEO insanely rich. If gates himself buys it sells Yahoo back to MS and adds to his insane fortune. Microsoft and integrates all of tYahoo's tech into MS and starts a second round of war against Google search and Google products.

Ya-who?

[tutufan]

Yes, but on the plus side, they now have a brand that people think of as still being in business...

Re:So what?

[meta-monkey]

You're not wrong, but I had to laugh at the idea of "ruining" GeoCities. That sort of implies that at one time GeoCities was not ruinous, and then became so.

Dangerous Games

[Whatchamacallit]

Tumblr is worth exactly squat if Yahoo screws with it too much. A social platform is only as good as it's users. If the users abandon the platform in protest to Yahoo's new direction it will spell the doom of Yahoo! Instagram's transition was initially painful and they lost a good deal of users. Yahoo has to be very careful, best to keep things the same for a long time and then slowly introduce improvements that will excite and encourage the customer base and not annoy them. A major misstep and it can all come crashing down very quickly... Social media is a high stakes game. To pay that much for Tumblr is an extreme gamble.

Re:This seems like complete insanity...

[ColdWetDog]

Look, you guys don't get it, do you? You never get this sort of thing.

Of course Flikr and Tumblr will mix well. They both end in a contracted 'r'.

It's pretty clear why you all aren't in business.

Do none of you fight for the users?

[Scorch_Mechanic]

No, I'm not talking about the irritating tween idiots. I'm talking about the artists. For every groupthink mob of self-entitled screaming idiots shouting their misinformed opinions at the top of their tiny little lungs, there's an artist taking advantage of the dead simple microblogging platform.

Tumblr is the home of the Drawblog (contains art), the Ask (ask a character questions, receive drawn responses) blog, and the art compilation blog. To my knowledge, none of these things substantially exist outside of tumblr. Sure, I could follow an "art appreciation" group on facebook, but because facebook doesn't deliver stuff to me in anything resembling chronological order it's largely useless to me.

I am worried. Legitimately worried that Yahoo is gonna screw up Tumblr.

Re: So what?

[Anonymous Coward]

so basically geocities was what tumblr is today.