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Yahoo Joins Growing List of Bidders For Hulu
An anonymous reader writes "It's reported that Yahoo has formally put in a bid to buy Hulu only a week after adding Tumblr to the family. From the article: 'Yahoo just spent $1.1 billion of its cash hoard to acquire Tumblr, a blogging site with 300 million mostly young-ish visitors and 24 billion minutes of usage per month. Yahoo CEO Marissa Mayer's team can slap a lot of tasteful, personalized native ads into the Tumblr content streams to monetize the fast growing site. It's the same way that Facebook and Twitter hope to get into the tens of billions in revenue league, but it's a long and winding road. Now Yahoo is taking a run at Hulu, with its 4 million subscribers paying $7.99 per month, original programming , and more than 70,000 full TV episodes. Hulu could immediately put Yahoo's video efforts and revenue in a different league.'"
Yahoo spent 1.1billion of 1.2billion in cash reserves to buy Tumblr. Where is this $200 million coming from?
Also, 300million seems low considering Hulu actually has decent revenue compared to Yahoo's other acquisitions which have lower revenue and were purchased for far more. E.g. Tumblr had $13 million in revenue last year, yet was purchased for 1.1billion; Hulu had $695 million in revenue the same year, 53 times that of Tumblr. Buying it for 1/4 the price would be a steal.
Hopefully, Hulu will refuse to be bought by a company so irresponsible with its money, or for an amount less than half of its yearly revenue.
Note all this discussion of "revenue" rather than "profits". Sometimes it's a useful proxy, but not always. In this case, they're spending $1.1 billion to buy Hulu. If that just gets them some revenue, that is by itself not very impressive, because they start $1.1 billion in the hole! They could've generated, say, $100m/quarter in revenue just by "paying" that money to themselves over the next 3 years. It's only worth buying a company with it if you hope to actually get back more than $1.1 billion!
10 PRINT CHR$(205.5+RND(1)); : GOTO 10
Their homepage is still heavily trafficked, and it's stuffed with ads and monetization schemes. For a lot of technically unsophisticated people who first got an internet connection back in the 90s, it's synonymous with the internet. It's the familiar first thing you see when you "go online." It's mostly vapid, uninteresting, pop culture, detritus to you and I--not to mention tastelessly cluttered--but it's compelling to a lot of people. Here's a hint what I'm getting at, you'll find celebrity gossip and sports scores prominently placed on their front page. The kinds of people who care about that stuff are the kinds who don't block ads, or even know it's possible; better still (for Yahoo) they are also the type who occasionally even click ads. They are real-world NPCs, Neal Stephenson's "slines" from Anathem, proles.
I'm probably being too hard on them. Maybe some are brilliant in other areas of life and don't care one bit about technology, they're just sticking with what's familiar, and Yahoo actually was a decent company with some useful services. Back in the 90s they had a very useful directory style listing of most of the Internet that was cataloged by actual humans. Back before Gmail they were a decent, free, mail provider. Many people continue to use @yahoo.com accounts. Still, it's hard to defend users who visit a site which devotes some front page screen space for horoscopes. I should add most of these things are customizable if you log in, but I wonder how many people go that far. Tyranny of the default must reign here, too.
If you build it, nerds will come. Soylentnews.org
Indeed. That's why I bought a domain ~14 years ago and have used that for all my personal correspondence (business-related stuff, of course, goes to the business address). It's extremely portable: I've switched back-end mail providers maybe half a dozen times in those years (mostly at the beginning when things were getting settled) with no disruption to mail service or needing to change my address. I highly recommend it.
For migrating to a new address, it's useful to have the old Yahoo/Gmail/whatever address forward to your new one at your domain (or otherwise setup the new system to periodically check for new mail from the old address). This way even contacts who haven't updated their contact list can still have their messages reach you (though you should remind them to update their contact list).
Having a "portable" address that's not tied to a particular provider is very handy.
Yahoo spent 1.1billion of 1.2billion in cash reserves to buy Tumblr. Where is this $200 million coming from?
Yahoo has about $3 billion in cash and equivalents as of their last quarterly statement. Additionally, purchases don't have to be made in cash on hand. The company could be bought using cash, stock, options or some combination of the above. Additionally the company could issue debt to raise the capital to fund the acquisition. Also they could partner with someone on the buyout.
For what it is worth, $300 million was last quarter's profit for Yahoo.
Also, 300million seems low considering Hulu actually has decent revenue compared to Yahoo's other acquisitions which have lower revenue and were purchased for far more.
Is it 1999 again? I thought the dotcom bubble burst. Here's why revenue doesn't matter. I can generate vast amounts of revenue selling $2 bills for $1. I'll have huge sales doing so. I'll also be bankrupt faster than you can say "Chapter Eleven". The only reason to use a revenue multiple for a buyout is because the company is not profitable and has limited prospects of becoming so.
The amount of revenue they generate is irrelevant unless it leads to profits. I've seen reports that Hulu has turned a profit though it is unclear how much or what the future prospects might be. Revenue without profits can only be a short term situation. Sometimes doing so makes sense for strategic reasons (see Amazon) but there MUST be a path to profitability. Either Hulu must be strategically vital or it must have future profit opportunities Yahoo is aware of and I am not.
Hopefully, Hulu will refuse to be bought by a company so irresponsible with its money, or for an amount less than half of its yearly revenue.
It's quite possible that a price of 0.5X revenue is a fair price. It might also be too high or too low. Typical multiples of revenue for buyouts are between 0.6X and 1.2X annual revenue for a profitable company. Varies by industry. Depending on Hulu's future prospects, a 0.5X revenue multiple might be a fantastic price for its shareholders. However that also likely means it is a questionable deal for Yahoo financially.
What this article is not mentioning nor any comment thus far asking is the very important question of what happens to Hulu's content deals when it gets sold? There is a reason Hulu has access to next-day TV from NBC, Fox, and ABC... because they own the damn company. There is a reason they have no shows from CBS. If Yahoo! or anyone else buys Hulu, will they still have access to next-day shows from most US networks? Would they lose ABC? Or would CBS come on board? These are very important questions because the US network access is basically the driver for all Hulu subscriptions... no one gets a Hulu account to look at second-rate movies.