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Will the Tumblr acquisition help Yahoo become hip again?Looking to gain a foothold among younger users, Yahoo is shelling out $1.1 billion for the blogging site Tumblr. CNET's Sumi Das and Dan Farber have the Inside Scoop on the high valuation and how it will affect the buyer, seller, and users.
-Hello, and welcome to Inside Scoop. I'm Sumi Das. And joining me is Dan Farber, he's an editor for CNET. Dan, thanks for being with us. -My pleasure. -So, Yahoo has gone shopping. They bought Tumblr for a really cool price of $1.1 billion. Why did Yahoo decide to make this purchase? -Well, it's actually a good fit for both. Yahoo is a company that's, you know, seeking to revive its brand. It's older-- it was a pioneer on the web but has since fallen on harder times. Marissa Mayer has come in as CEO over the last years. She's bought 10 little companies, and mostly for engineering talent. But now she's actually buying eyeballs, which is to say Tumblr has about 300 million visitors per month, 24 billion minutes are spent on that site every month, and it has about 108 million blogs. Add that all up, it's a lot of content. It's a lot of users. And most importantly it's a lot of young people who are very mobile. -Clearly this has to be valuable in Mayer's eyes because otherwise, why would you pay $1.1 billion in a mostly cash deal from what I understand. -Well, it's valuable over the long term potentially. And it's gotten more along the lines of what Mayer, who would say-- yeah, Google-- what Google has done with YouTube, which now generates about $4 billion in revenue. So over time, they hope to scale it up and go from, you know, 100 million blogs to a billion blogs or whatever it might be. But most importantly, they need to monetize it right now, as of last year that Tumblr did about $13 million. They say they're gonna do closer to 100 million this year, but it's still a kind of drop in the bucket for a company that has $5 to $6 billion. -There's been a promise from Mayer that they're not going to acquire and quite screw it up, because there are some very avid and ardent Tumblr users out there. Still we've heard reports of people defecting over the weekend to Tumblr competitors basically. What is the sort of reassurance going to get them, the promise of not screwing it up? I mean, do you think in reality that the service will remain unchanged? -Well, for the short term, they've made a promise. Mayer has made a promise to David Karp, who is the founder and CEO of Tumblr which is a 6-year old company compare to Yahoo's 18 years, that they will leave them alone, they will be run independently, that Yahoo will help out on personalization and infrastructure and monetization, but they're free to continue to do what they've been doing over these last several years. Over time, you would expect that there would be much more integration. The thing that wasn't mentioned, and this was rather curious, is that Tumblr is a social network. -Right. -It has followers and people follow each other. There is no mention of that. There were no numbers about that. It could be that they just don't want any comparisons to Facebook or Twitter. But it may be over time that Tumblr provides a backbone for Yahoo to have its own social network. -So that is one of the ways that it could be integrated into Yahoo's services and he [unk]-- -Over time-well, primarily to be integrated through search. When you search on Yahoo, whether on the web or Yahoo sites search, you'll see Tumblr results as well as through personalization. For example, if you are searching on something on fashion, well Yahoo is not really great on fashion content, Tumblr is. So they would be able to understand your profile and if you're interested in fashion, bring up some Tumblr results when you're searching on Yahoo or in your personal newsfeed. -The changes that Tumblr users can expect to see, you know, you said that over the short term, they're probably wouldn't be any. But there's a major one that probably a lot of users are concerned about and that's advertising. What do we know about how advertising may play a bigger role on Tumblr, because of this acquisition? -Well, I think it's very important for Yahoo to make some money-- -Of course. -from this acquisition, but they have to do without alienating the Tumblr users. Tumblr has already been involved in what's called native advertising, which is advertising that look like a blog on Tumblr, but they say they're sponsored. And they're in the news flow of what people are reading. I think that Yahoo is going to continue that and accelerate it. And perhaps do other kinds of brand advertising and display advertising. But as Mayer likes to say, they're going to do it in a tasteful way. -All right. Well, she's a tasteful woman, at least in her appearance there. And hopefully that's true. Dan Farber, thank you so much. For Inside Scoop, I'm Sumi Das. Thanks for watching.