Tumblr Deal Gives Yahoo Social, Mobile Boost
With the $1.1 billion acquisition of Tumblr, Yahoo is putting a serious claim in for the future of social and mobile technology. Whether it turns out to be a boon or a bust for Yahoo shareholders, the deal will be one of the biggest tests for chief executive Marissa Mayer's leadership.
Let's start with the obvious point. The purchase price is a lot of money. Yahoo is not getting Tumblr on the cheap. At $1.1 billion, the company will be spending about one-fifth of the cash and short term investments it had at the end of its last quarterly statement. This is a big bet for Yahoo.
So what does Tumblr have to offer Yahoo? For one thing, Tumblr has a great mobile presence. Its users have been quick to download its mobile app. Yahoo would like to leverage the experience of the Tumblr team in growing mobile engagement for its broader offerings. It also gives Yahoo unique insights into the way people interact socially on the mobile web.
Furthermore, there's a certain "coolness" factor here. One of Meyer's challenges has been convincing the tech community that Yahoo will once again be a cutting edge company that programmers, designers and inventors will enjoy working for. Bringing David Karp, Tumblr's founder, on board is evidence that this is possible.
Meyer has promised not to "screw up" Tumblr. Karp will remain in charge of the blogging service he started six years ago. His entire team will remain in place. Tumblr is not about to suddenly transform itself into a heavily-branded Yahoo product. Executives at Yahoo and Tumblr did not respond to requests for comment.
(Read more: Yahoo To Buy Tumblr, Vows 'Not To Screw It Up')
One of the reasons Meyer is so vocal about this is that she wants to reassure Tumblr's community. The Tumblr crowd is notably, well, emotional and somewhat "indy." There is certainly a danger that anything viewed as a Yahoo takeover would send them fleeing to rivals.
But this hands-off policy was probably also a precondition to getting Karp to agree to sell his company to Yahoo and an ongoing condition of keeping him onboard. Although Karp is not as cantankerous as some well-known Internet founders—he's not the type to put "I'm CEO, Bitch" on his business card—he is fiercely loyal to his product and its users. The creation and expansion of Tumblr has been a labor of love. It's doubtful he would have surrendered to a corporate overlord.
There is a specter haunting the Tumblr acquisition, however. It's the specter—or should I say spectr—of the earlier acquisition of a once ubiquitous photo-sharing site called...well, wait. Do you remember? It also lacked an "e" between it's penultimate consonant and the final 'r.' It was everyone's favorite photo-sharing site until, suddenly, under Yahoo, it wasn't.
I'm talking about Flickr. After Yahoo acquired Flickr in 2005, the service stagnated. Its technology just did not keep up with developments at rival sites. Its staff chaffed under Yahoo's bureaucracy. Many of the top people left. The effort to move into mobile was a disastrous failure. Flickr faded from memory and use.
That was long before Meyer's time at the helm of Yahoo. It most likely serves as a lesson in what not to do. The question is whether the broader organization of Yahoo has really learned from past mistakes.
Disclosure: CNBC has a content-sharing partnership with Yahoo's finance site.
_By CNBC's John Carney. Follow him on Twitter at @carney.