Yahoo Chief risking failure with Tumblr purchase

To help solve the problem of Yahoo’s flat revenues, she’s acquiring a company that generates nothing. Or nearly nothing.
To help solve the problem of Yahoo’s flat revenues, she’s acquiring a company that generates nothing. Or nearly nothing.

Is Marissa Mayer riding for a fall? Or just a bit of a Tumbl(r)?

It all depends on whether she can successfully generate a bit more than the pitiful $13m (£8.6m) of revenue that Tumblr, the blogging website she is going to use $1.1bn of Yahoo's money to buy, has so far managed.

To help solve the problem of Yahoo's flat revenues, she's acquiring a company that generates nothing. Or nearly nothing.

Ms Mayer cut her teeth at Google, one of the most successful and innovative internet companies the world has seen.

Yet there's something very old economy, and old school, about her formula for getting Yahoo back to being spoken of in the same breath as her old shop. With cash to spend, she's trying to buy her way out of a jam.

Now it's true that Google, and Facebook, have paid large sums to acquire newish companies with little or no revenues (YouTube and Instagram respectively).

But their need for an infusion of gold dust and sparkle was nothing like as great as Yahoo's. Neither was an essential buy, although YouTube now generates lots of revenue for Google.

If Tumblr is to resemble it, rather than a Bebo, a MySpace or even an Altavista (which ended up in Yahoo's stable), Yahoo needs to persuade its growing army of users to accept an increasing number of ads on the site.

Tumblr may need to adopt a revenue-sharing model like YouTube's to do this, although that's not clear yet. What is clear is that, whatever tactic it deploys, Yahoo needs to do it in such  a way that Tumblr's users remain on side.

Its executives only need to look in the dustbin of internet failures to find any number of examples of cutting-edge internet businesses that failed after trying to push their users in directions they didn't want to go in an attempt to boost revenues.

Can Ms Mayer see the danger? The omens aren't great. This, after all, is someone who decided to play the badass CEO when she walked through the door, banning her staff from working from home. She wanted people under the thumbs of their managers, doing things like discussing work ideas around the water cooler. Where they're just as likely to chat about basketball scores. Or how little they think about the new boss's old ideas.

Most of those employees will stay put, though. It's a job after all. The same is not necessarily true of Tumblr users. If she tries such hardball tactics with them, she may find them tumbling away.

Topics:  tumblr yahoo

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