In Pride and Prejudice, before achieving her happy ending with Mr. Darcy, Lizzie Bennett receives a marriage proposal from Mr. Collins, a toadying little man who offers a lifetime of a) stability and b) teeth-grinding annoyance. She turns him down, and her friend Charlotte promptly snaps him up. A 27-year-old woman of limited means in 18th century England, she’s realistic about her options and grabs her best bet with both hands.
Let’s not kid ourselves that Yahoo! is anything other than a Mr. Collins.
In many ways, Tumblr has made an advantageous and, yes, lucrative match. It’s probably the biggest, splashiest exit since DoubleClick’s $3.1 billion sale to Google. On Tumblr’s end, investors exit nicely, David Karp has enough dough to buy any motorcycle sidecar that catches his eye, and everyone involved avoids a white-knuckled ride toward the end of the company’s runway.
For Yahoo–naked breasts notwithstanding–it’s a great way to purchase a whole bunch of young eyeballs and mobile users. Besides, if you’ve ever stumbled onto a Yahoo Answers thread, it’s pretty clear their content can only improve.
But this isn’t exactly a cake-and-confetti ending, either. Tumblr was reportedly running out of money, and it turns out the money wasn’t coming in as fast as everyone thought, either. A source told Valleywag Tumblr’s revenue for 2012, largely reported as $13 million, was actually less than $5 million, and Tumblr’s Q1 revenues weren’t where they needed to be to hit that $100 million end of year target. The company had just lost a string of execs.
According to TechCrunch, many at Tumblr felt $1.1 billion was just a first offer. Instagram, a less mature company, sold for a billion (though much of it was in stock, which reduced the ultimate price tag). AllThingsD says there weren’t even competing deals–there’s no Jack Dorsey pouting over how this played out.
Thinking along these lines, it seems Tumblr was less a success–wouldn’t real success mean finding a way to monetize the business without hand-holding from a Valley behemoth?–and more that the New York City startup was simply lucky to have Yahoo as a willing rescuer. And while Mr. Karp has made a tidy sum, he won’t be buying Larry Ellison’s share of Lanai any time soon. A few more angels will get their wings, but it’s hard to see a whole heavenly host coming out of this deal.
Meanwhile, Yahoo says the social network will remain independently operated, but it’s highly likely that Mr. Karp’s pretty art project–which he’d said he didn’t want to flip for a big payout–will soon have more of the ads he’s long resisted. (Anyone hearing early Tumblr investor Jakob Lodwick’s dictum that “an acquisition is always a failure” echoing through their brain?) And while Marissa Mayer’s made progress toward turning the Titanic, Yahoo has earned its reputation as a startup graveyard. Even if we’re not looking at a Flickr or a Geocities scenario, that doesn’t make Tumblr a savior for the ailing web giant. There’s no guarantee it’ll end up as successful an acquisition as YouTube. One analyst dares to compare the deal to AOL’s purchase of the Huffington Post. Talk about a loveless marriage.
Well, there’s always Etsy!