May 20 - Yahoo's decision to buy blogging service Tumblr for $1.1 billion has raised questions about how the internet company will integrate the website- with lots of traffic but little revenue. Bobbi Rebell reports.
Yahoo's deal to buy Tumblr for $1.1 billion is getting a lot of attention- both for the bold move- and for the even bolder price tag. The blogging site brought in just $13 million in revenue last year- and has never made a profit. But Yahoo CEO Marissa Mayer sees a winning combination: SOUNDBITE: MARISSA MAYER, CEO, YAHOO (ENGLISH) SAYING: "They also have a phenomenal amount of content being published on the Tumblr platform, 108 million different blogs on Tumblr and 50 billion individual hosts. That content is something that we can bring to bear on Yahoo's media network. Strengthening our products and our verticals, and we couldn't be more excited about that. " And the deal is about a lot more than dollars and cents according to Ross Rubin of Reticle Research: SOUNDBITE: ROSS RUBIN, PRINCIPAL ANALYST, RETICLE RESEARCH (ENGLISH) SAYING: "It's an advertising driven business. This is a content aggregation play. In some ways, you could think of it as the same sort of thing that Amazon is trying to do with its original content. That Netflix is trying to do with its original content. Find some stars, build them up, turn them into properties that are attracting more eyeballs." Yahoo is big - for all its troubles it is still the # 4 ranked internet property worldwide- according to comScore. But Tumblr blows it away when it comes to growth. Unique visitors on Tumblr soared 85 percent in April. Yahoo's were up just 6 percent. And Yahoo 's revenue has been shrinking- as consumers flock to rivals like Google and Facebook. Yahoo says the Tumblr deal will boost its audience by 50 percent- to more than a billion monthly visitors. Yahoo has a rocky history with acquisitions- and was quick to say of its Tumblr deal that it won't "screw it up". Rubin believes Yahoo could learn a lot from its rivals- that this deal, along with Flickr, could actually be a key piece of the puzzle. SOUNDBITE: ROSS RUBIN, PRINCIPAL ANALYST, RETICLE RESEARCH (ENGLISH) SAYING: "One of the things that we saw with Facebook when it acquired Instagram is that it had this great status posting mechanism the sharing system in place, and it added photos to the mx with Instagram. Yahoo already has the photo sharing piece with Flickr. It really needs to devote more attention to that to build it back into the prominence that it once had, but clearly there is a marriage there- you can see including Flickr photos directly into Tumblr feeds. There is a mobile opportunity here because Tumblr is very easy posting mechanism, much like Twitter. " After the bell, Yahoo also unveiled a revamped version of Flickr, with much more free storage space, new sharing options, and a greater focus on images.