Tumblr joins social media’s billion dollar club

Yahoo has acquired social media platform Tumblr for $1.1 billion, the biggest acquisition under CEO Marissa Mayer, which also ranks it amongst some of the largest acquisitions in the social space.

“We promise not to screw it up,” Mayer said candidly, speaking about the acquisition.

“Tumblr is incredibly special and has a great thing going. We will operate Tumblr independently. David Karp will remain CEO. The product roadmap, their team, their wit and irreverence will all remain the same as will their mission to empower creators to make their best work and get it in front of the audience they deserve.”

“Yahoo! will help Tumblr get even better, faster,” Mayer said.

So, why did Yahoo want Tumblr? With more than 300 million monthly unique visitors and 120,000 signups every day, Tumblr is one of the fastest-growing media networks in the world, Yahoo said.

Moreover, the social blogging platform has a strong mobile reach, with half of its users making use of the mobile app.

The $1.1 billion acquisition comes after the French government recently blocked a deal between Yahoo and Dailymotion, which would have seen the Internet company buy the video site for a much smaller $300 million.

Dailymotion attracts 112 million users to its site each month.

Social is not cheap

Yahoo’s Tumblr acquisition adds to the growing list of social messaging, blogging and network sites that have commanded a premium price for its technology, user-base and content.

In 2006, Internet giant, Google, paid over $1.6 billion to acquire YouTube – a buy which has to-date proven to be a great success for the company, drawing in over 1 billion eyes to its extensive video library (and, of course, Google’s ads).

But even YouTube’s high-price buyout is dwarfed by the $8.5 billion pricetag Microsoft coughed up for VoIP and IM operator, Skype, in 2011.

The price Microsoft agreed to pay for the company was 32 times Skype’s operating profits at the time, making it the largest acquisition the software company has made – a move which shocked many analysts.

However, it was in April 2012 with Facebook’s acquisition a photo-sharing and image editing application, Instagram – which was sold for a $1 billion ($715 million after Facebook’s stock drop) – that raised many eyebrows.

At the time of the buyout, Instagram‘s user base was around 30 million users; over the past year, the app has become its own bona-fide social network, catering to over 100 million users.

But despite having a big daddy in Facebook, the company has given no clear path to monetising its wares and delivering some kind of return.

Company Bought by
Acquisition cost
Year User numbers
Skype Microsoft $8.5 billion 2011 280 million
YouTube Google $1.65 billion 2006 1 billion
Tumblr Yahoo $1.1 billion 2013 180 million
Instagram Facebook $1.0 billion 2012 100 million
MySpace Specific Media $35 million 2011 25 million
Mxit World of Avatar $40 million (R380 million) 2011 7 million

However, the real value of social networks is a tricky thing to determine and maintain – something which Rupert Murdoch’s NewsCorp learned the hard way. With its wallet.

In 2003, NewsCorp bought popular social network MySpace for close to $600 million. With the advent of Facebook and other social media, MySpace faced a decline in user numbers and when NewsCorp sold the property to Specific Media – headed by Justin Timberlake – the site commanded a price tag of only $35 million.

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Tumblr joins social media’s billion dollar club