Feeds

Yahoo 'won't screw Tumblr'? Then Tumblr will screw its balance sheet

Mayer attempts to saddle up the web-ad unicorn

Security for virtualized datacentres

Comment Famously, Yahoo! has promised during its $1.1bn buy of hipster blog site Tumblr not to "screw it up".

If I was a Yahoo! shareholder, I should hope not - given the head-spinning number of dollars. But not screwing up is like Google’s promise to “not do Evil” – impossible to comply with, and something people throw back at you.

In the case of Yahoo!, which paid about a fifth of the money it made in 2012 for a social network with no obvious revenue-generation model, the pressure to meddle will be immense and unavoidable from the very start.

And Yahoo! has previous form here.

Remember Flickr and Delicious?

Exactly. Nobody remembers or cares about the latter and when it comes to the former, that pan went off the boil years back.

With Flickr and Delicious, Yahoo! followed the prescribed M&A playbook of folding the new asset into its existing corporate structure and reporting lines.

That’s a formula for disaster if you want to reap the benefits of a web company: the smaller, faster moving company gets sucked into the slower moving entity and becomes subjected to bigger departmental politics and changing corporate strategies.

Invariably, you lose two groups of people - the assets that made the new company special and desirable in the first place. You lose the employees whose engineering or ideas attracted the second important group - the users. This second group drift away to new rivals as the service invariably degrades and is no longer perceived as good as it used to be. Yahoo! isn’t unique: News International did the same thing with MySpace as Facebook ascended, and now even Rupert Murdoch admits it, calling his service “CRAPPY.”

Yahoo! promises it has learned its lessons, and that Tumblr will be kept at arms length. Tumblr will be run independently and operated as a separate business, with chief executive David Karp in charge and the product, service and brand spared the purple branding iron.

In this, Yahoo! is following the new rule established by Microsoft when it bought Skype for $8.5bn in 2011. Microsoft’s loss-making P2P VoIP telco is run as a separate entity and has retained its own product and technology development heads, its chief executive Tony Parsons – who reports to CEO Steve Ballmer - and it's kept the Skype brand.

Microsoft learned the hard way. It’s done plenty of acquisitions, but its biggest failure was also its biggest purchase - until Skype: aQuantive for $6.3bn in 2007. aQuantive was to turn Microsoft into an ads publishing and creative shop that would serve ads across Xbox Live, Windows Live, Office Live and MSN, and turn into a "digital advertising opportunity for all".

Staff left, aQuantive was cut up and sold off, and five years later Microsoft wrote off most of the billions it had spent, saying the acquisition hadn’t accelerated growth “to the degree anticipated".

Good intentions not to meddle are one thing, but can Yahoo! be trusted and how long will its promise last?

There’s plenty of reason to leave Tumblr alone and very little reason to start meddling. Like Skype, Tumblr is an extremely simple proposition that does one simple thing. Skype is a simple VoIP and vidcall service used by millions and Tumblr is a photo, text and media posting and sharing service also used by millions. Their biggest asset is not product lines, but the oldest asset in the book – end-users. In the case of Tumblr, it's 300 million unique users and a claimed 50 million blog posts per day.

Tumblr, like Skype, doesn’t have highly diversified product lines, manufacturing or channel operations around the globe that need to be rationalized to suit a new owners’ hub-and-spoke operations or put on single price lists and go-to-market plans. These are not complex beasts like StorageTek (bought by Sun Microsystems) or – even – Sun itself, bought by Oracle.

Security and trust: The backbone of doing business over the internet

More from The Register

next story
Phones 4u slips into administration after EE cuts ties with Brit mobe retailer
More than 5,500 jobs could be axed if rescue mission fails
JINGS! Microsoft Bing called Scots indyref RIGHT!
Redmond sporran metrics get one in the ten ring
Driving with an Apple Watch could land you with a £100 FINE
Bad news for tech-addicted fanbois behind the wheel
Phones 4u website DIES as wounded mobe retailer struggles to stay above water
Founder blames 'ruthless network partners' for implosion
Sony says year's losses will be FOUR TIMES DEEPER than thought
Losses of more than $2 BILLION loom over troubled Japanese corp
Radio hams can encrypt, in emergencies, says Ofcom
Consultation promises new spectrum and hints at relaxed licence conditions
Why Oracle CEO Larry Ellison had to go ... Except he hasn't
Silicon Valley's veteran seadog in piratical Putin impression
Big Content Australia just blew a big hole in its credibility
AHEDA's research on average content prices did not expose methodology, so appears less than rigourous
prev story

Whitepapers

Secure remote control for conventional and virtual desktops
Balancing user privacy and privileged access, in accordance with compliance frameworks and legislation. Evaluating any potential remote control choice.
WIN a very cool portable ZX Spectrum
Win a one-off portable Spectrum built by legendary hardware hacker Ben Heck
Storage capacity and performance optimization at Mizuno USA
Mizuno USA turn to Tegile storage technology to solve both their SAN and backup issues.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?
The next step in data security
With recent increased privacy concerns and computers becoming more powerful, the chance of hackers being able to crack smaller-sized RSA keys increases.