The Yahoo board has approved a deal to pay $1.1 billion in cash for Tumblr | Hacker News Reader

The Yahoo board has approved a deal to pay $1.1 billion in cash for Tumblr

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208 pointsgbuckingham89175 comments

This makes it pretty simple to judge Marissa Mayer's performance at least in the next year. If Tumblr shows any sign of failure, its pretty much equivalent of Marissa Mayer failing at Yahoo. If tumblr shows signs of progress not seen Pre-acquisition, it's a sign of an ex-Googler making a smart acquisition AND making it succeed in the long run.

Google is the best company when it comes to making large acquisitions work out for the parent company. Just see Analytics, YouTube etc.

Yahoo is probably one of the worst if you see how many of their 100M+ acquisitions have resulted in complete failure.

I disagree. We don't know what Yahoo wants to do with Tumblr. All we have are rumors, a WSJ report and tons of idle speculation. Without knowing what the intended end game is, I don't see how we can call the acquisition a "success" or "failure", much less the CEO's. I also don't agree that "a sign of progress" is "making it succeed in the long run".

Google is no genius with large acquisitions either. Motorola and Blogger come to mind immediately, but there are others too.

I think we can all agree that Yahoo has been mismanaged at least until recently. I just don't think a CEO's performance is a boolean value that depends on an undefined "any sign of failure" on a large acquisition with a 1 year time frame.

Google is a genius at acquisitions IMO. To qualify as a genius you don't need a 100% of acquisitions to work out. You do need a few to work out tremendously. Google has those. Meanwhile, what's the last yahoo acquisition that didn't turn into disappointment soon after the acquisition? We can go back 15 years and be hard-pressed to find one. On the other hand there are plenty of disaster acquisitions including broadcast.com, geocities, bluelithium etc.

This thread sounds like "he said, she said".

Anyone got a nice spreadsheet of who has acquired what, with the fate of the acquired unit and people? How long did they stick around? That seems like the minimum - maybe there are clever ways to add information to it.

Here you go, per your request, all 76 of them, but not including this latest one.

https://en.wikipedia.org/wiki/List_of_mergers_and_acquisitio...!

>Meanwhile, what's the last yahoo acquisition that didn't turn into disappointment soon after the acquisition?

One could argue that that the last acquisition that worked out was the acquisition of Stamped. Something tells me they were behind the new Yahoo! Weather iPhone app which is stellar.

I don't mean to imply that Yahoo is more successful than Google at acquisitions (We know that isn't the case). I just don't think Google is a good benchmark for acquisitions. I think they as good or as bad as Yahoo.

I think Yahoo's problem with acquisitions has been that they are moderately successful initially and then drift away over time. ViaWeb, GeoCities, Musicmatch Jukebox, Konfabulator, delicious and Ludicorp (of Flickr fame) come to mind. Other than Flickr, none of the others are still around, but they weren't disappointments soon after acquisition either.

Konfabulator is still (unfortunately) somewhat still around in the form of Yahoo Widgets for Connected TVs, a platform I have had the misfortune of working with in the past. But I suspect this too will soon be dead as any interest that still exists in this area has already shifted to Google TV.

I sense a theme there: everything they acquired was underwhelming before they acquired it.

Tumblr, on the other hand, has a lot of users that are fully addicted. I can see things turning out differently.

ViaWeb was re-branded Yahoo Stores, and is still alive and, presumably, healthy.

Of a sort. It was rewritten in C++ and Perl (http://people.csail.mit.edu/gregs/ll1-discuss-archive-html/m...), but is still an active product in its new form.

Even GeoCities is actually still around in the form of Yahoo! Small Business. At least from a technology perspective.

Overture?

Motorola stands out as a clunker. It is very expensive, even for Google. It is a distraction for management. It is a threat to Google's culture. It fails to be a stick to beat patent trolls. It has all the problems of an underperforming mobile OEM, while breeding doubt among Google's important partners. And all these criticisms were leveled by many people before Google bought Motorola. Some things really are plain to see.

So far, Meyer is doing what needs to be done to turn Yahoo into a first tier competitor. Who knows if she will succeed, but it's good to see them try.

> Motorola stands out as a clunker.

When Google bought Motorola, the reasoning I read was all about patents. They still have those patents, and it might have been a good acquisition no matter the state of Motorola the company...

And hey look, a coincidence: Google has been getting more and more into hardware since then.

Motorola X-Phone

To know that Motorola was a poor acquisition, you'd need to know what would have happened if Google hadn't done it. Defensive/preventative decisions are sometimes undervalued.

That's essentially saying that one needs to know alternate history, which is obviously impossible. So, any mention of 'undervalued' can be counterbalanced with 'overvalued' absent facts.

By that logic, no decision whatsoever can be analyzed at all.

Google is just getting started with Motorola so it's too soon to tell and I'm pretty sure that Blogger has been a huge success (through adsense) and many successful blogs uses it. It went down though since Facebook and Twitter for obvious reasons but the same thing happened to most blogging platforms.

I'm sorry, but in the 12 months since the acquisition was announced, MOT has lost pretty much every court case it's been in, had patents invalidated, has been passed over by google for 4 (might be even more?) flagship 'nexus' products, and hasn't built/shipped/teased a single thing newsworthy.

You can't seriously be arguing that this has gone well?

> MOT has lost pretty much every court case it's been in

I think for Google to be assuming an aggressive position in the courts is just posturing. Can you imagine the reaction if Google did really go all at it, and there was a result of an injunction against sale of all iPhones? No, of course Google/MOT would not go for something like that, that makes no sense. As it stands though, MOT's patent portfolio is pretty damn good. They're in a good position for it. It was something they needed and now they have it.

Google needs to be finished with Motorola.

"Just getting started" is what you hear from Nokia. That's not a good sound.

Motorola is a hardware company. it takes much longer to fix a hardware company. Do you think it took 12 months for Steve Jobs to fix Apple when he came back? Come on.

For a random $30mil acquisition (hypothetically), there's a lot of gray area where it's hard to judge whether the overall benefit to the parent company is net positive or net negative. For a $1 bil acquisition, it's a lot easier to judge and the stakes are a lot higher.

I also don't agree that "a sign of progress" is "making it succeed in the long run".

What? How can success ever not be a sign of progress? I know Silicon Valley likes to celebrate and learn from failure, but there ought to be a limit somewhere.

I meant the converse, sorry. I was responding to the idea that "a sign of progress" within a year is the same as "making it succeed in the long run".

A business without a proper model, lack of revenue, losing money, fighting off pornography and spammers is worth 1.1 billion in cash to Yahoo. The users will flee, they always do. The engineering dept. will be hired out, it always is. All that Yahoo will have is a domain, a database filled with cats and naked people, and a real problem on its hands. Bad move, Yahoo. The way to re-build Yahoo is not to buy zombie businesses. It is to give the engineering dept. freedom to innovate.

As always? is this the rule? Given precedents of instagram etc, it doesn't seem like an improbable price.

However, how is tumblr fighting porn? I thought they actively encouraged it. It's a big part of tumblr for sure (and big part of the value yahoo pays for).

Instagram was growing rapidly and threatening FB as the place to share pics. Tumbler is declining.

What you are describing sounds like what happened to GeoCities.

Tumblr is GeoCities, circa 2010. And that's why Yahoo purchased them of course. Nothing has changed about the nature of what Yahoo is. The only thing Mayer is doing is collecting a new group of properties to replace the stagnant old ones. It's not brilliant and it won't get the earnings flowing.

While I do agree that Tumblr is the new Geocities. I think you're wrong when you say it's not a good idea buying it. Yahoo is building something very different from Google and Bing by buying tumblr.

Different? No. Its simply repeating past mistakes. Tumblr makes no financial sense. If they wanted to bring in talent to innovate, they could simply buy fifty bootstrapped startups for 5% of the Tumblr deal. That would net them the people they would have wanted. The only reason Tumblr is being bought is due to how Yahoo is showing off to the market. The CEO is simply trying to position Yahoo as bullish. Wall street will rejoice, their stock goes up (for a short time), and the shareholders rejoice. But this sort of thing does not last a long time.

I think it's not about bringing money to the company, but giving a new image to Yahoo. People are going to associate tumblr, which is something pretty new and cool on the internet, with yahoo. Which is? Maybe a mail? A search engine? Nobody knows anymore.

Yeah, we've all seen this story played out many times. It's a move that's good for the short term but terrible for the long term.

Maciej Cegłowski: "Marissa Mayer secretly named Google employee of the month for third month running".

Per AllThingsD, "There were no other competing bids, despite reports, to snap up the New York-based hipster blogging service."

http://allthingsd.com/20130519/yahoo-tumblrs-for-cool-board-...

Can someone explain to me why you spend $1.1B on this if the company was running out of cash, had investors skittish about funding a new round and there were no competing bids.

Why didn't Yahoo just let them get desperate and buy them then? With an all-cash deal, it seems they're less interested in the team than the platform so seems they could have picked that up in a few months for significantly less.

What am I missing in this? I hope the answer is not that doing that would create enmity between Yahoo and Tumblr's investors or something like that? That would strike me as a gross violation of their fiduciary duty to their shareholders, no?

If you and Marissa Mayer want the last burger in the world, how much is it worth? What if you're Mark Zuckerberg, and it's really important to her that you don't get a taste of that burger? Maybe she doesn't even like burgers.

Factors like the cost of the burger, or how fresh/tasty it is, become less important.

Also, all-cash doesn't mean what you think it means. The currency used to pay for a company (cash, stock, pork bellies, whatever) is independent of the vesting schedules of the employees/founders acquired. Typically investors receive most stock/cash immediately, while employees receive some up front and the rest over a period of time that is negotiable. 3-4 years is standard. Some deals are front-loaded (more than 50% in the first half) and others are back-loaded (the reverse).

The point about vesting is one I hadn't considered. Thanks.

Re: the burger analogy, that also makes sense in the context of there being competition for this deal. But aside from a puff piece in TC which looks placed by sources (aka Tumblr banker Frank Quattrone), there didn't look like much competition in this case.

But nevertheless, thanks for the informative answer.

Well, if you are British, you'd want to check that burger doesn't contain horse meat.

And as amusing as that might or might not be, there is also a point there.

There's nothing wrong with horse meat.

There are far fewer controls and standards for horse meat in much of the EU, meaning a lot of the meat which was being passed off as beef could potentially contain dangerous drugs not fit for human consumption.

If it's properly regulated though, you're right that there's no problem with it.

Potentially, there's a problem with any meat if you can't have confidence in where it came from. (British buyers didn't know they were buying food containing horse meat. They were being duped.)

If the beef isn't beef, you can't really count on any of the other food integrity items - like freshness - to be accurate either.

Horse meat's fine, I've had it... but it's unacceptable and potentially dangerous to have it sold as beef.

Who said there was?

unless it is sold as beef , then it is a scam since horse meat is quite cheap ,beef is not.

One must never look at this deal based on the acquired's metrics and dynamics. One must look at this based on the impact of the acquirer. Instagram was worth $1 billion as it was potentially a $10 billion reduction in FB's valuation at IPO with this threat hanging out there. Tumblr is worth a billion because of the strategic value to Yahoo. In this particular case Yahoo can close massive gaps in age demographics and mobile in one fell swoop. Tumblr was discussing ad revenue of $100 mil this year. Yahoo, with much deeper experience and relationships here, can probably do much better than that this year and beyond. So it may "pay for itself" within 3 - 5 years which is nice on top of all the other benefits.

Yahoo could monkey around and try and pick it up in a "fire sale" in 12 months for $500 mil. But maybe that never happens and they still wake up tomorrow well behind in the youth and mobile demographic. I love that Yahoo, after sooo many years of indecisiveness, is being decisive and bold. Not sure if it'll pay off but these seem to be well thought out calculated risks.

>Tumblr was discussing ad revenue of $100 mil this year.

But weren't there other reports that they were going to hit 15M instead? Whoops. If they had 100M revenue, they wouldn't me needing to raise more cash; their burn is far smaller.

Maybe if they let it die, the service slowly dies too, and then the audience leaves -- Assuming that's kind of what Yahoo is after in the first place; but I'm completely guessing here

All cash does not mean there isn't a portion of it restricted to a time or objective based schedule for key employees (or even all employees and shareholders).

If they intend to continue operating it (highly likely) buying while they are still with cash, all of their staff, and vibrant is quite possibly a better outcome than buying a broken company for less even only a few months later.

Disclosure: I am long Yahoo in my personal portfolio and I've led many M&A activities for Rackspace.

Also, the question isn't $1.1B or nothing, it's what amount would Tumblr say yes to?

Would they really have turned down an offer of $700 million? $800 million? Was $1.1B really the least they'd accept?

I bet they would have accepted significantly less, rumors to the contrary.

But the billion dollar headline has its own value, I guess.

This is great news for the NYC startup ecosystem, which had been lacking in the billion dollar exits that create the next generation of entrepreneur-investors.

How many of Tumblr's employees have been with the company more than a year or two? It sounds like they were only 20 employees at the end of 2010 [1] so I'm curious how many people actually got significant enough vesting to get the cash to call themselves entrepreneur-investors.

[1] http://techcrunch.com/2010/11/19/tumblr-funding-office-hires...

The Double Click acquisition spawned a ton of investment and led to companies like Gilt and 10gen. It will be interesting to see what Marco Arment does with a cool $100 million or so. He seems to have a golden touch. Tumblr, Instapaper, and The Magazine makes him 3 for 3.

Considering Marco left Tumblr a year before [1] they raised their last $85M round at $800M valuation [2] do you you think it realistic/possible that he had 1/8th the company after that deal?

[1] http://techcrunch.com/2010/09/21/marco-arment-instapaper/

[2] http://techcrunch.com/2011/09/26/tumblr-raises-85-million-ro...

My rule of thumb is co-founders have 2/3, employees have 1/3, and investors cause a 75% dilution per round. Thus since their are 4 rounds, .75^4 * 2/3 => 21% between the founders.

However, in this case it appears that Marco wasn't a co-founder, but rather a first employee with an equity grant. If it were for 5%, it is probably worth ~1-2% now, and so I'd reckon he will see $15M. That is a lot of money, but not enough to change the startup landscape.

I wonder how much shares he has. Two days ago he tweeted that:

https://twitter.com/marcoarment/status/335483318311194624

> @ericf @jsnell 1) I was technically an employee, not a founder. 2) My shares were from the first funding round, before any further dilution.

How much shares would a (number 2?) employee typically get? And does it mean his shares were diluted or not?

How does it feel to work at a company when it pays over a billion dollars to 20-somethings working on the opposite coast?

It's not mentally reconcilable. The only way not to go crazy is if you don't think about it at all, but that's just denying the reality of you being exploited while getting few of the benefits.

Some people say, "Well, I have 'job security!'" Is "job security," the greatest corporate-serving propaganda of our generation, really worth $800,000 per year in surrendered earnings?

Frankly, I don't get your position.

If you believe that price should be determined by supply and demand based on perceived value, like it mostly is in these cases, then there's no exploitation.

If you believe that price should be attributed based on Labor expended, then the Yahoo! workers are already extremely disproportionately paid relative to the average worker, so it makes no sense for them to feel exploited.

How exactly are the Yahoo! workers exploited?

How exactly are the Yahoo! workers exploited?

I think that's between the employee and their own view of the world. If you worked at Yahoo for six years doing something, anything, and then Yahoo buys a six year old company run by a 26 year old for a billion dollars — what were you doing the past six years? Couldn't it have been you? Why not?

Every computer person employed by a company isn't generating a million dollars a year in value, but most could if they were pointed in the right direction. Even those who are generating 10x to 1000x the value of their salary aren't compensated proportionally (hence, why startups exist).

Because you were working at a company, and not taking the risk building your own.

There's no foolproof way to know what will generate value ahead of time. Sometimes in order to use their skills to generate value a developer requires resources ahead of time that only a large company can provide.

If you work on a failed project as an employee, then at least you got paid a salary during that time. As a startup founder you walk away with nothing.

As a startup founder you walk away with nothing.

That's kinda the problem these days. Failed startups have social connections making founders millionaires even when their venture was worthless. Some startups (not in the tumblr case) are essentially projects where you show the world Hey I Can Do Stuff then you get a few million dollars as a hiring bonus.

Failed startups have social connections making founders millionaires even when their venture was worthless.

They do? Where does all that money come from and why would its owners give it away like that?

Some startups (not in the tumblr case) are essentially projects where you show the world Hey I Can Do Stuff then you get a few million dollars as a hiring bonus.

Yes. And for each, there are a bunch from which the founders walk away with very little.

Maybe instead of assuming the Yahoo! workers are all idiots who are exploited because they're unable to see that they should all be working at startups, you should try to start from the principle that they're not idiots and understand why they don't.

On the off-chance this is not a troll,

> but most could if they were pointed in the right direction

Also, I could make a killing investing in this here penny stock...

I'd recommend watching the #yahoo! feed on Tumblr in order to watch the Tumblr community's reaction, and see the inevitable hilarity.

(Not providing a link due to high probability of NSFW content. Search for #yahoo! on Tumblr.)

    Please sign this petition! [...] we can do this. We got a 
    girl a goddamn fluffy chicken, and took over the Internet 
    with the Mishapocalypse.

What on earth are they talking about?

Also

    no chance well be google users 5eva if you do this

Mishapocalypse is something of a tumblr meme.

5eva is also a meme, although it's better known across the web (coming from a cringeworthy copy-pasted text)

And like everything else that happens via Tumblr, this entire series of events will be forgotten in less than a week, regardless of the outcome.

Same is true for Twitter, Facebook and Reddit.

It's amazing how many people here are saying things like "my tumblr represents my identity and I do not want to lose my identity to Yahoo" and "I don't want to lose the only place where I can express myself."

Well, it's filled with asocial, mostly female, teenagers like myself. Those statements are fairly accurate, in some sense.

They've started a petition... http://www.ipetitions.com/petition/stop-yahoo-from-buying-tu...

Already at 150k. Looks like Yahoo made a good purchase!

I love the extra comma on that petition site.

    ,149,476

Has any internet petition ever worked?

Yes. It more or less saved Germany from internet censorship.

http://www.netzturbine.de/en/internet/zensursula-deutsches-i...

I was actually thinking about petitions about private companies and their business decisions, not politics. If Tumblr or a Yahoo had their own corporate petition platform, then yes, but comparing a petition on some random website with a petition on the website of the German Bundestag is like comparing apples to orangutans.

Sorry. This was not clear to me. I thought you were talking about any internet petition. :)

For issues where a public petition might matter, yes. Usually they serve as social proof to press lawmakers and other public figures to deal with something. Quantifying popular opinions/demands is a powerful tool.

In this case it's just a pointless show of anger by teenagers.

Link to copy (HN doesn't like ! in links): http://www.tumblr.com/tagged/yahoo!

Another reason I didn't put a link even with a caveat is because link parsers don't like exclamation marks. But it looks like the non-exclamation mark feed today wasn't as bad as yesterday, so proceed at your own risk.

I wonder how this will pan out for Tumblr with Marissa Meyer at the helm. If we look at Flick (bought by yahoo in 2005), it hasn't seen much innovation or new features in the last 8 years and has been mostly coasting. I wonder if this will be the case for Tumblr under Marissa's leadership.

Flickr had a major interface refresh a couple of years ago, and I'm also pretty sure Flickr has lots and lots of paying customers. So, it may have already "panned out," in a "don't mess with success" sense, depending on what that means in the context of Tumblr.

Flickr updated their site a few months ago along with the release with their new iPhone app. It still doesn't feel like a modern site and it doesn't work as well as it should.

Supposedly there is a new Flickr being shown off tomorrow and hopefully Yahoo rebuilt the site from the ground up.

What the heck does Flickr actually need? Social garbage? No thanks. Just let me put my fucking photos somewhere. I'm a paying customer for like 6 years, it does exactly what I want. The only feature Flickr needs to work on is making uploads from my editing app easy. Everything else can go take a flying fuck off a short pier.

If there aren't enough paying customers then yes, it does need to add new features to attract new users.

Yeah, the overall UX has needed updating for quite some time, but I also imagine their paying customers (photo nuts) are some of the pickier users out there. I wouldn't be surprised if the best course for Flickr is to be as conservative with changes as possible.

Even if it's the best course, it might still wreck on the coral reef cruft of dead accounts and abandoned groups. Flickr has been in decline for a while. I doubt incremental changes could bring it back.

dead accounts and abandoned groups don't pay for their accounts. those who do pay are the picky users.

It needs an overhaul, but it does what I need, which is share a few hundred images, broken up into sets. I've tried a couple other sites and apps, and haven't switched yet.

It does what everybody needs at this point but people have drifted towards services like Instagram because it is so well thought out and easy to use.

In a lot of ways most people are looking for what Flickr offers but refuse to use it. They want privacy, a place to back up their full-resolution smartphone photos and for a very cheap price.

Depending how much you trust Google's privacy settings, doesn't Google+ fit that bill? I don't think it's what photographers really want, but it sounds like a solid alternative.

Do professional photographers use Instagram? That's Flickr's bread and butter.

As a long term Flickr user, I can only say I totally love it. It is simply perfect for what it is and I happily pay for my pro subscription every year, and I would hate to see it change into something else because someone else thought they knew better than me what I needed.

Yahoo may be better maintainers than innovators, but I'd rather have seen posterous acquired by Yahoo and maintained than acquired by Twitter and killed.

I share your reservations, but has Tumblr really been going anywhere the last couple of years? It's a little like Flickr in how it's calcified in development, but is still a solid product, nevertheless, albeit one that feels a bit stale.

Tumblr really has blown up in terms of users and content created (anecdotal evidence from some folks I know that used to intern there) -- however their issue is they waited too long to figure out how to monetize. And to be honest the formula for monetizing requires experimentation and iteration.

"it hasn't seen much innovation"

For the existing team at tumblr (say anyone who has stock that is) things like this end up being a buzz kill after it settles in. Working towards something is fun and motivating. Once you get it things simply change (speaking from personal experience and observation here (also as you are pointing out).

For example, would you like to get paid now for all the work you are going to do for the next 10 years in advance and still find it as fun and challenging? If you were an athlete would you want to know in advance that you were going to win 2 medals in each of the next olympics? To me that takes the fun out of things. I think it's obvious why things are different after money changes hands.

In this situation how do you show up for work at twitter and still be creative after essentially the "game", if you want to call it that, is won? You will probably itch to get over to a new challenge. Not to be cliche but the journey is a big part of the picture.

You write "twitter" where you mean "tumblr".

Thanks - fixed (will happen at twitter just the same!)

And wasn't one of Marissa's plans when she came aboard to try and revive Flickr, since she saw it as a big asset? Not that it's jumped leaps and bounds since then, but I would think that she'd want to nurture tumblr a bit.

According to the verge there is a flickr redesign coming up soon: (check update2: http://www.theverge.com/2013/5/17/4341144/yahoo-to-hold-mond...)

The updated Flickr iOS app is pretty awesome, and exactly what Flickr needed.

Maybe Yahoo's involvement with Tumblr will be limited, much like Conde Nast's management of Reddit.

Then it would defeat the purpose of the acquisition. Perhaps a middle ground? Initially limited involvement, slowly integrate feature/traffic to other yahoo property in a way that doesn't devalue current tumble experience but also gives yahoo a younger crowd as their userbase.

Its obviously very hard thing to do, but I am (probably the only one in HN) rooting for Yahoo. Tired of 2-3 companies dominating the tech world. I am rooting for Marissa Mayer to succeed and give others a run for their money by doing an epic u-turn with yahoo and changing everyone's perception of what yahoo is usually associated with.

It'll have integration with Yahoo's own services but it also presents a few more headaches with pirate links and takedown notices.

We're starting to see another destructive trend in acquisitions. First we saw a trend in acquihires. This clearly is bad for users and only serves founders interests. Now we're starting to see a trend towards acquiring relevance. For example, Facebook bought Instagram for "$1 billion" before it made any money for the sake of remaining relevant. In Facebook's defense, they bought it on a cash/stock (reportedly 30% cash/ 70% stock) deal. The stock ended up being worth much less. Yahoo buying Tumblr may work out, but it's very unlikely it will have any direct financial return on investment. The only return on investment is the slight chance Tumblr stays a relevant brand and in return keeps Yahoo's brand afloat. Yahoo needs to make some big bets, but I'm not convinced this is the right one.

What do you think would be their best bet? My guess is it would be something less trendy since most of those end up being fads. Google's best acquisition was clearly Applied Semantics; not YouTube.

Thoughts on why this was an all-cash deal as opposed to similar comps (Instagram, YouTube) which were cash/stock mix?

My best guesses:

1. Yahoo would rather spend cash than stock (possibly because they anticipate Yahoo stock going up in the future). If Yahoo thinks that $1 in stock today will be worth $2 in 3 years, it might make more sense to spend cash. This is a huge gamble, of course.

2. Cash is intrinsically more valuable than stock; in other words $1 cash != $1 stock. Yahoo may feel more comfortable spending $1 Billion cash than spending $2 Billion stock.

3. The obvious, but maybe too obvious, answer: Tumblr doesn't see a future in Yahoo stock.

This doesn't make sense. Which CEO doesn't believe that their stock won't go up in 3 years? If they don't believe it, they should be fired.

Cash is much more valuable than stock. Any CEO worth their salt would ALWAYS issue stock and never cash, since stock is essentially free (with some GAAP repercussions, but better that then spend cash). But it sounds like tumblr wanted cash instead of cash/stock.

It doesn't matter to the employees, they get paid out from the purchase, and then will all get YHOO retention stock options when they join.

Great deal for tumblr, terrible deal for YHOO, it's a waste of cash and as someone else pointed out last week, it's reminicient of Geocities from the dotcom days. Every employee from tumblr will start exiting, maybe after 2-3 years, and the entire thing will fall apart.

I'm disappointed in Mayer.

"This doesn't make sense. Which CEO doesn't believe that their stock won't go up in 3 years? If they don't believe it, they should be fired."

This is clearly untrue. Which moron CEO at the head of a newspaper anticipates anything more than a very modest increase in their stock over the next few years? Most newspapers are very much aware of their problems. Do you think a CEOs job is to bury their head in the sand and ignore all of the company's problems? Because that's the only way your statement could even come close to being true.

And 2.. as far as Yahoo.. keiferski is right.. it depends on how rapidly yahoo anticipates to grow. Obviously a stock growing at 50% is worth more than one growing at 10%.. and maybe Mayer is incredibly bullish on Yahoo, and believes Yahoo stock is worth more than what the market thinks it is.

A CEO's job is to increase shareholder value. End of story.

This means increasing the stock price. So yes, I do believe that this statement is absolutely true. The CEO needs to figure out a way to increase shareholder value, whether they are Yahoo, or Washington Post, or New York Times, or Groupon. They are not supposed to sit around and maintain dividends. Whether it's breaking into new businesses, selling their current underperforming businesses, etc, that is why they are CEO, to think of new ways to make money and increase stock price. Not to sit on their laurels and collect their paycheck.

3 years is MORE than enough time for any CEO to execute a strategy that increases shareholder value. If they can't, then they should be fired.

"3 years is MORE than enough time"

So you're saying there were no CEOs at the end of 2008 that thought that even with all of the work they were doing to improve their company, that the recession would have net negative effect on their business. Do you really believe that?

And as this applies to Yahoo... we have no idea how bullish Mayer is on Yahoo.. maybe she thinks the company is going to grow very rapidly over the next few years, and doesnt want to give up a single share. If she is MORE bullish on Yahoo than the market, then Mayer would have considered Tumblr's demand for X number of shares unreasonable.

A CEO's job is to do whatever it is that shareholders hired her/him to do.

A CEO that can preserve value and maintain dividends is a good one. Who wouldn't want to invest in a stable and profitable company?

If you knew that stock was never going to pay dividends, then why would anyone ever want it? :/

For a small enough company; because it might be bought. For example, Activision Blizzard might be bought fully by Vivendi.

Please see #194: http://www.bwater.com/Uploads/FileManager/Principles/Bridgew...

Cash is not always more valuable than stock. Complicated topic but I'll make one example related to this. As an investor would you rather have cash and pay taxes today on all of your gains or would you rather have stock in a reorganization where you could continue to hold and decide when and how to trigger the income?

The investors here chose cash and since I'm not part of the process I don't know why for certain, lots and lots of complicated factors at play.

"This doesn't make sense. Which CEO doesn't believe that their stock won't go up in 3 years? If they don't believe it, they should be fired."

Yes, they should be fired, but that's not how business works. In reality executives are self-dealing all of the time and corporations survive due to the constant small wins and losses between large groups of self-dealing people.

The CEO, as an insider, has the best knowledge of a company's financial position and estimates of the coming year. Additionally, executives can manipulate earnings and costs by a degree to achieve the outcome they want.

Issuing stock signals to investors that insiders expect the price to go down just as buybacks signal that it will go up. Issuing stock will send the stock lower whether or not the actual numbers show losses in the future.

Cash is much more valuable than stock.

this claim is indefensible. It depends on the valuation of the company. For example, at IPO MSFT had 25M shares outstanding @ $21, total market cap of $525M. Obviously 5M shares of MSFT stock (market value of $100M) in 1986 was worth far more than $100M of cash.

On the flip side, $100M in cash would have been worth more than $100M in Groupon stock (at the IPO valuation).

More valuable than stock ex ante, obviously not always ex post.

Since the price of a publicly traded stock reflects expectations about future valuations, but also has some additional risk, the cash is usually going to be valued more. "indefensible" is too strong, "not true in every single possible case" might be more accurate. Even then, your examples aren't that helpful; an example of a publicly traded company whose shares were widely thought to be underpriced would be better.

Cash is much more valuable than stock. Any CEO worth their salt would ALWAYS issue stock and never cash

Here's the entire quote. Steven2012's claim is that cash is always more valuable than stock. He's dead wrong. If you don't believe me, maybe you'll believe Buffett on how Dexter Shoes was one of his worst deals ever.

http://www.reuters.com/article/2008/03/01/us-berkshire-buffe...

What I had assessed as durable competitive advantage vanished within a few years," Buffett wrote on Friday. "By using Berkshire stock, I compounded this error hugely. That move made the cost to Berkshire shareholders not $400 million, but rather $3.5 billion. In essence, I gave away 1.6 percent of a wonderful business -- one now valued at $220 billion -- to buy a worthless business."

here's a more general discussion from Buffett on cash versus stock

http://1nvestments.blogspot.com/2012/09/buffett-using-cash-v...

Instead, our problem has been that we own a truly marvelous collection of businesses, which means that trading away a portion of them for something new almost never makes sense. When we issue shares in a merger, we reduce your ownership in all of our businesses -- partly-owned companies such as Coca-Cola, Gillette and American Express, and all of our terrific operating companies as well. An example from sports will illustrate the difficulty we face: For a baseball team, acquiring a player who can be expected to bat .350 is almost always a wonderful event -- except when the team must trade a .380 hitter to make the deal.

Because our roster is filled with .380 hitters, we have tried to pay cash for acquisitions, and here our record has been far better.

That's a better example, thanks for sharing it.

From the acquirer side:

Maybe they wanted to put some excess cash to work.

Cash is important when you don't have it. But once you have it, it's a dead asset that produces no meaningful return. Excess cash is important as an option on future opportunity. Apparently, Yahoo found their opportunity.

Or, maybe they didn't want to revise EPS estimates down.

An extra $1B worth of $YHOO out in the marketplace would dilutes EPS by about 3% until the revenue starts flowing.

From the acquiree side:

Opportunity vs sure thing + choice of opportunities.

$1.1B in $YAHOO today will be worth something else tomorrow. Maybe more. Maybe less. Maybe $0. Cash is guaranteed to go down in value at the rate of inflation. But not more. And they get to decide on some other opportunity(ies) to go after.

Maybe they don't have faith in Yahoo's future?

Or maybe yahoo's stock is not as sought after like it was for google (and still is)?

Tumblr might not have valued Yahoo! stock; They would lose control and possibility of fucking everything up is possibly high.

I still think this is a bad acquisition. I mean don't get me wrong, Tumblr has potential to be something great but at present it feels like a more modernised version of Geocities complete lots of animated GIF's, memes and soft pornography. It's definitely not worth $1.1B (but what do I know?).

They have the traffic, but it won't be easy to monetise. It might be good for Yahoo! to tackle a large challenge and let Meyer truly show them she has the moxie to turn the fledging company around.

Considering Yahoo! have a nice cache of PHP based websites, it makes sense the purchase of Tumblr is as much as a talent hire as it is an acquisition of a high-trafficked website with potential. Will be keeping an eye on this, if and when Yahoo! buy Tumblr. The deal isn't even concrete yet, but it's still highly likely given Tumblr has months left to choose a buyer and finalise a deal.

This reminds me of Excite@Home buying Blue Mountain Arts and Webshots because they got a lot of hits. How incredibly not useful!

Yahoo hasn't done much justice to their past buyouts. I feel like this going to be a waste. Yahoo isn't doing much for their existing products. They should really focus on what they have. No doubt the apps and all have been updated but desktop UI still remains same. No consistency in UI across different products. The new ymail still isn't that great. Another thing is why can't yahoo come out with own such product - they do have some brilliant engineers.

I am thinking that the problem with yahoo is that most likely Mayer doesn't have much faith in the present crop of developers/managers. Recently she did a lot of acqu-hires, because traditionally really good developers are less likely to join Yahoo over better choices.

Maybe improving existing products and making new impressive products are in the plans for Mayer, but to get there she needs capable people and she needs to make Yahoo seems like a good/profitable/fun place to work at.

For a long term sinking ship like Yahoo I think major changes in direction will need some time.

This is the time to start the next Tumblr, as the last Tumblr is now dead.

For the same reason that Flickr was replaced by Instagram (and missed the entire mobile wave), Tumblr will lose traction over the next couple of years and be replaced. They'll stick around, but their traffic will fall by half in 24 to 36 months. Flickr for example has been losing traffic for two straight years.

Nothing less cool than using a Yahoo blogging site if you're a teenager. That isn't going to change soon.

The rate at which Yahoo is buying out companies for talent acquiring , I wonder what must be going through minds of engineers at yahoo.

A rising tide lifts all boats.

From a recent-grad perspective, Yahoo fell far, far behind the rest of Big Tech on the desired employment scale. Part of this was for changeable reasons -- we've read in recent months about the larger offers and better perks that Mayer's been implementing -- but another huge reason is that Yahoo's workplace has a reputation for uninspiring people doing uninspiring work.

From all the anecdotes I've heard about Yahoo's workforce (and yes, I realize they are merely anecdotes) -- the subpar engineers should be worried, but the great engineers should be excited.

Looks like then some major changes at Yahoo expected.

It's mixed. Some are jealous of what some of these startups, like Summly, are getting paid. Others are happy to have more talented people to bolster our ranks.

I'm definitely in the latter. I've watched Yahoo lose so many great people, especially last year. This is a good thing for Yahoo.

As an outsider it looks like Yahoo is saying it will back big crazy engineering projects if they have potential. To me Yahoo went from being the last place I'd ever want to end up to being an exciting company. It's an amazing turnaround.

However big crazy engineering projects require money which is been sunk into dumb social purchases instead.I can imagine it killing internal engineering morale also.

Why does any of this making working at Yahoo as an engineer even a little more exciting?

All we've seen so far is external projects get big money and attention. Where's the internal projects that would make working for Yahoo exciting?

Right now I'd rather be working for a company that planned to compete with Yahoo.

Yahoo unlike google doesn't gives that much freedom to engineers to work on their own ideas. Engineers can't make much difference, if same managers who are not doing much now are present. Some major revamp of workforce starting with managers is needed.

How pre-posterous (pun intended).

How is this becoming public information so quickly? Is this being leaked? It seems like it's not beneficial for this to become public knowledge for anyone except Tumblr if they are trying to start a bidding war.

Yahoo employees can't keep secrets and are always leaking things to AllThingsD (a sister company to WSJ).

Yahoo is leakier than most - Kara Fisher seems to know anything that happens there

*swisher

Heard Kara "Fisher" for the first time, and not sure why, but I like the sound of it.

This isn't an unsolicited deal, the CEO brought it to the board for approval after completing negotiations.

This is a done deal now, it's not the start of Tumblr's bidding process.

I suspect a big part of the reason that Yahoo! makes these acquisitions if for PR, i.e., "look! we're a dynamic company making huge moves!"

Look at Summly---how much value did they reap simply from the media coverage? They killed the software immediately, and I'm sure Yahoo! Research could've whipped up a pretty decent summarization engine at no extra cost.

They integrated Summly into their Yahoo iOS app within 30 days of acquisition. They're using it to provide summaries of news articles in the app.

Correct me if I'm wrong, but didn't they integrate "Summly's summarization technology" into their app, which was licensed from SRI?

Does anyone know how they get traction the very first time ? It's interesting how they got this far while the initial reception seems cold [1]. What kind of marketing they do ? what's the vertical ? answer from quora[2] doesnt satisfy me.

1. https://www.hnsearch.com/search#request/submissions&q=tu...

2. http://www.quora.com/Tumblr/How-did-Tumblr-get-traction

The original headline from WSJ was “Yahoo to Buy Tumblr for $1.1 Billion” which is obviously questionable since they state in the same article that Tumblr has not actually confirmed the deal.

Now other outlets are reporting it as a done deal when it isn't. http://www.daniellemorrill.com/2013/05/in-race-to-be-first-o...

Yahoo has to make acquisitions like this.

There is room for more full-service Internet ecosystems. Microsoft has under-invested in their ecosystem. Or maybe they can't decide if they want a full-service consumer-oriented ecosystem.

No overseas-based ecosystems are strong enough to enter the US market. Yahoo is strong in some markets in Asia. If they can buy a couple more top brands and shine-up Flikr, Yahoo Finance, and some others, they will be in good shape.

Seems smart--most of what I use Yahoo for nowadays is content (Y!Sports, Y!Finance), and Tumblr adds a lot of content.

Wow, in light of the recent (rumor?) that FB was going to snap up Waze for $1B, this seems like a steal.

I most curious what does it mean for me, as tumblr poster. Couple of months ago I started OC artwork blog on tumblr.

Now I must probably wait until this things settles, to know is it worth investing my time or not, what changes they are going to make etc.

Assuming this is true, does the 1.1 billion in cash tell us that this is purely about the property and not in any way about the team, or is that over-reading / misreading the tea leaves?

Nope, there could still be vesting periods/golden handcuffs etc., this just means it was cash rather than Yahoo stock. It tells us that Yahoo preferred to spend cash than stock, or Tumblr's founders wanted cash rather than Yahoo stock, or a combination of the two, which can be a starting point for any amount of speculation.

R.I.P. Tumblr

Will they let the porn stay?

I dont understand why Yahoo would need Tumblr , nor i got why they bought Summly the price they paid.

Is it to look relevant ? Yahoo has a ton of services, a ton of engineers and apps that could do better if they were made better. Yahoo still feels like it is 1999. Why not work on yahoo mail and make it relevant ? groups and make it relevant ? what about their ugly homepage ? I mean there is a ton of things to do, instead of buying things like Tumblr.

Marissa is cute and intelligent , but what's her strategy for Yahoo? At that rate , she'll be out in a year.

What does cute factor have to do with anything in this thread?

“Ballmer is rotund and intelligent, but what’s his strategy for Microsoft?” sounds just as silly.

Seems like the OP's sentence has a sexist undertone to it.

Because CEO is company's main representative and being charismatic/attractive certainly wouldn't hurt company's image. This applies to both male and female CEOs.

And since when calling a person pretty qualifies as sexism? Or is it the lack of "women in IT" threads lately that makes people throw the S-word around irrelevantly?

> Yahoo has a ton of services, a ton of engineers and apps that could do better if they were made better.

Does buying Tumblr take away focus from their other services? I don't think Yahoo engineers working on those projects will be transfered to Tumblr.

> Yahoo still feels like it is 1999. Why not work on yahoo mail and make it relevant ?

Yahoo mail is plenty relevant. It's the 3rd largest email provider with 281 million users. And they updated it last December.

> what about their ugly homepage ?

They updated it. Also ugly != functional.

> I mean there is a ton of things to do, instead of buying things like Tumblr.

Once again, you are assuming the two are exclusive.

> Marissa is cute and intelligent , but what's her strategy for Yahoo?

What does her attractiveness have to do with anything?

good ,so what product makes Yahoo relevant in 2013, Yahoo mail ? Sorry but the Tumblr deals only feels like a stunt to me.

They need a social network. Badly. All their other services, including email, belong to a bygone era (with the exception of acquisitions like Flickr).

Who do they need a social network ? are people going to move from Facebook or Twitter to Tumblr? No. They need a good an new idea , an innovative product that will draw attention. and a consistent strategy . People are fed up with social networks ( i.e. Google+ ).

Tumblr is not valuable at all for advertisers , unless you are selling porn...

What's Yahoo mobile strategy ? What's Yahoo's cloud strategy ? ect ...

I see no strategy , only buzz ...

I'm sure plenty of engineers at Yahoo have great ideas ,it's just feel like what's really broken is Yahoo's management. Why would they pay that much for Tumblr, really ?

>are people going to move from Facebook or Twitter to Tumblr? No.

Huhwhat? Of course they are. Do you not have friends doing this already?

I have zero friends that have left Facebook or Twitter for Tumblr.

I have a number of friends that have added Tumblr, but they haven't left anything.

Because I think social networks are the future, they will be to future generations what the world wide web has been up until today. Ignoring social networks today would be like ignoring the www in the mid 90s (aol online, msn).

Just because social networks are the future doesn't mean Yahoo needs to take on facebook head on (see: Google+).

Plus, Tumblr IS a social network, just not built in the image of facebook. So is instagram, youtube etc.

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