Yahoo! Swears It Isn't Going to Screw Up Tumblr—but How Realistic Is That Promise?

Yahoo! Swears It Isn't Going to Screw Up Tumblr???but How Realistic Is That Promise?
David Karp, co-founder of Tumblr, speaking in New York last year
Photograph by Jennifer S. Altman/Bloomberg

As the dust begins to settle from one of the most significant acquisitions in Web-land since the Facebook/Instagram deal, the warm glow of euphoria created by Yahoo!’s $1.1-billion takeover of Tumblr has given way to the harsh reality of blending—or, more important, not blending—two vastly different companies and cultures. In a statement about the deal, Yahoo Chief Executive Officer Marissa Mayer promised not to “screw it up,” a comment undoubtedly aimed at the sensitive community of Tumblr fanatics.

Is it even possible for Yahoo to keep this promise?

Even before the news was confirmed on Monday, critics with long memories were reminding anyone who would listen about Yahoo’s track record with acquisitions, which has some rather notorious bumps in it, including two major ones known as GeoCities and Flickr. Those deals alone have made many question whether Yahoo will be able to do the right thing with Tumblr. While it may be unfair to lay the blame for these at Marissa Mayer’s feet, there are plenty of reasons to be skeptical about the future of this latest acquisition.

In 1999, Yahoo bought GeoCities for about $3.5 billion, which even at the time was an eye-popping amount. Although that was over a decade ago, which is eons in internet time, there are some broad similarities between what GeoCities was then and what Tumblr is now: distinctive, somewhat chaotic communities focused on allowing individuals to create their own spaces. Yahoo did a number of things that arguably accelerated the demise of its high-priced acquisition, including trying to monetize it through hosting fees and cheesy banner ads.

The other stick that many anti-Yahoo types use when they want to beat the company up about its acquisition strategy is Flickr, the pioneering photo community that languished under Yahoo’s ownership until relatively recently. As many of its hard-core fans (including me) have argued in the past, Flickr was—or at least could have been—Instagram before Instagram.

There have been a number of post-mortems on what happened with Flickr. In a nutshell, Yahoo did almost everything wrong: The larger company took away or smothered much of the photo-sharing community’s most important features, prevented its employees from innovating or growing, and forced all kinds of integration between the two platforms that did nothing to benefit users—in fact, it achieved precisely the opposite. This was like the trifecta of failure, a perfect example of why most large-scale acquisitions don’t work. As Gizmodo put it: “All Yahoo cared about was the database its users had built and tagged. It didn’t care about the community that had created it or (more importantly) continuing to grow that community by introducing new features.”

It’s  reasonable to argue, as many of her fans in Silicon Valley have done since the Tumblr deal was announced, that Marissa Mayer shouldn’t be held to account for these lapses because she had nothing to do with them and the Internet has changed a lot since then. Yahoo is also substantially more desperate than it used to be (however hard that is to imagine), and this has arguably made Mayer more cautious about potential screw-ups.

But the bottom line is that, just because Mayer is a new CEO, it doesn’t mean she or the company won’t screw Tumblr up somehow, anyway—either deliberately or by accident. That’s because large companies such as Yahoo have a way of destroying the value of the things they acquire, even if they don’t mean to do so, especially when the thing they have acquired is a somewhat unique community with special characteristics, which Tumblr arguably is.

This is why successful large acquisitions of Web communities or services are sufficiently rare that almost everyone can only point to a single example: namely, Google buying YouTube (although Facebook’s acquisition of Instagram looks as if it may become a second one). The question for Yahoo and Mayer is whether Tumblr can be kept as a distinct entity, yet still monetized as YouTube has been, or if the process of monetization will inevitably turn Tumblr into the latest example of a MySpace-style failure.

Former YouTube exec Hunter Walk took a look at what Google did right in the case of YouTube, and he has boiled it down to five factors, including keeping the product from getting too intertwined with the parent company and maintaining a separate physical identity. To me, the most important ones were:

Protect Tumblr from “helpful” Yahoos: This is where the accidental destruction of acquisitions often comes from— people who just want to help, but whose requests for features and other attempts at integration wound up almost “hugging us to death,” as Walk puts it. There is a powerful desire to get efficiencies out of acquisitions, but many of those attempts fail badly and ruin the thing they were trying to monetize or grow in the first place.

Stop short-term monetization that won’t scale: Walk talks about how YouTube managed to avoid the natural desire to build all sorts of easy-win monetization methods into the platform, focusing instead on longer-term approaches that were harder to sell in the early going but built more value. If Yahoo sees Tumblr as a way to bulk up its banner ad or other programs, it could wind up making the mistake that YouTube avoided.

In the end, much of the answer to the question about Yahoo screwing up Tumblr rests on Mayer and her ability to stave off the desires of Yahoo’s board of directors and senior managers who see Tumblr as either a distraction or a digital cow to be milked and then sent to the abattoir.

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