The long-brewing sale of Yahoo’s core business to Verizon announced earlier this week has left a wide open question: What will be the fate of Yahoo’s eclectic social network, Tumblr—and the peculiarly loyal community that comes with it?
The Yahoo sale comes at a moment of reckoning for its young social network. Earlier this month, Yahoo devalued the platform—for the second time in a year—which subtracted $482 million from the site’s valuation overnight. From the headline $1.1 billion price tag Yahoo paid for the blogging platform in 2013, the acquisition now bears little more than one-third of its original valuation. Yahoo’s July 18 quarterly earnings report attributed “a combination of factors, including decreases in our projected Tumblr operating results and estimated future cash flows.”
While vague, such an explanation seems to point to a flawed initial valuation rather than any dramatic changes in Tumblr’s usage or ad sales. Indeed, doubts about the $1.1 billion valuation have persisted since the acquisition. In an explanation of the write-down, Yahoo CEO Marissa Mayer offered only that Tumblr’s ad inventory “is growing so quickly, it’s outpacing demand and it’s causing this monetization shortfall.”
The nearest comparison to the Tumblr acquisition is Facebook’s similarly priced acquisition of Instagram, a broadly analogous social network that has more successfully monetized its audience. When measured against such a perceived success, the Tumblr acquisition as a whole falls drastically short.
A behind-the-scenes investigation on the state of Tumblr from 2015 details the business’ failure to reach an ambitious and controversial ad sales goal for that year of $100 million. While factors are myriad, the decision to have Yahoo’s sales department take over Tumblr ad sales—and then the subsequent reversal of that decision—no doubt caused some level of churn and misdirection within the young site’s organization. And it goes a long way to explain the disparities between the relative success between the Tumblr and Instagram acquisitions.
So far, cheeky Tumblr users are freely speculating at what fate their “new overlords” will bring (image at top). One user on Monday comped up a Tumblr dashboard with the familiar subdued navy washed an unforgiving Verizon red, while another went so far as to imagine a migration of the Tumblr wordmark into Verizon’s visual identity.
Despite the tongue-in-cheek commentary, some users are voicing more serious consternation recently that the network could be abruptly and unceremoniously shuttered—their networks and content that have built over the years vanishing overnight.
Though no plans regarding the social network surfaced as of yet, there’s a clear indication that the Tumblr brand will hang around for the foreseeable future.
While Yahoo’s new owner has yet to say anything directly about the social network, indications so far should reassure Tumblr fans. According to Bloomberg, Tim Armstrong, CEO of AOL (also recently acquired by Verizon), will “get a crack at restoring the luster of Yahoo’s brand, meaning supporting strong sub-brands, rather than tinkering.
“We will be running a house of brands structure with multiple strong brands,” Armstrong said. “We think it is a strategic differentiation for us to have a significant set of brands with passionate users. If you are Yahoo Mail user, you will see a lot more Yahoo not a lot less Yahoo in the future.”
Even while the macro focus is on chipping away at Google and Facebook’s dominance in digital advertising, Tumblr faces upstart challenges to its core turf in the likes of Snapchat, Giffy and Medium. Tumblr still faces a continual question of continued growth, while it’s testing new advertising models including giving its bloggers a cut of ad sales. If anything, the writing-down of Tumblr’s value pre-sale should give it breathing space in the immediate future to chart a strategic course of its own.
In the long term, that’s about rolling out new features before upstarts can stake even wider claims. But in the shorter term, it will necessarily be about more adequately selling the eyeballs it has. The Tumblr-verse may squirm, but that seems to be the only way to keep the lights from suddenly cutting out—or the dashboard cutting to bright red.
—Jared Spears is a Verbal Identity consultant with Interbrand New York.