Making sense of Yahoo's Tumblr acquisition

Yahoo's $1.1bn acquisition of Tumblr is more than an attempt to "buy hipsters". In fact, Yahoo needs content platforms to fuel its growth and it seems Tumblr proved to be a prime candidate.

In what has been a relatively slow year for big acquisitions in the tech world, Yahoo’s board has approved a billion-dollar-plus layout to buy Tumblr, a blogging platform with in excess of 100 million blogs as of mid-May 2013. For Yahoo, the Tumblr purchase represents its first big move under Marissa Mayer’s regime and an attempt to move its brand back into the consumer-tech conversation.

Why Tumblr and why now are sensible questions and lack clear answers save for the common meme that Yahoo is trying to “buy hipsters.” While that may be fun fodder for the Twitter cybergabfest, Mayer and Yahoo no doubt have some concrete plans beyond PR value and such pat answers as “because they were available” and “we bought Tumblr before one of our competitors did.” After going through a checklist of Yahoo needs and Tumblr strengths, here is one realistic path—content platforms.

The content platform play: Previous Yahoo execs have always talked about Yahoo’s “content buckets”—original, licensed and user generated (i.e. Yahoo Contributor Network) as one of its key strengths, and as a leading vertical content portal for such areas as sports, finance and gossip/celeb news, Tumblr makes sense as a content management-meets-curation platform. Such a move would allow consumers, brands and marketers (i.e. content marketing) to curate Yahoo’s syndicated content (original and licensed) and use those pictures, videos and stories to create personal and professional Tumblr pages. Coke and Campbell’s are just two of countless brands that have created Tumblr sites to showcase their wares and tell their stories to consumers. The content platform plan allows Yahoo a few revenue paths including a freemium service option and a venue for targeted advertising. It also allows Yahoo to get even more mileage out of one of its key “cool” brands—Flickr (another e-less product).

One has to applaud Marrisa Mayer’s “go big or go home” move and the notion that Yahoo’s board is standing behind this purchase will (reportedly) full support. A successful integration of Tumblr into Yahoo’s forward-looking strategy could end a losing streak of purchases and fizzled launches which includes Maven Networks and Geocities as well as Livestand and Yahoo 360. Mayer’s biggest challenge—something Yahoo has not shown to be a strength—is to integrate Tumblr into Yahoo’s product set and get the cash register ringing again.

Certainly one cannot overlook the power of Yahoo attempting to make itself cool and relevant again, but this must be more than a very expensive PR move. The Tumblr purchase has to be followed up with other moves to bolster its mobile and social strategies. The yodel may be on its way back—time will tell.

Allen Weiner is a Research VP at Gartner. 

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