Tumblr Is Yahoo's Instagram – Or Is it?

For the most part, internet analysts and ad industry observers are applauding Yahoo’s $1.1 billion acquisition of microblog Tumblr. The timing appears to be right for both companies. Yahoo CEO Marissa Mayer, fresh from a series of acqui-hires, saw an opportunity to bring a new media network with a young, socially engaged, and logged in audience.

In turn, Tumblr has been turning heads with some proof that the six-year-old company could actually start to generate meaningful ad revenues with the launch of mobile ads on Tumblr’s iOS and Android apps – a year after the PC version of Tumblr rolled out “Radar” sponsored ad units.

AdExchanger asked a number of Yahoo and Tumblr watchers for their take on the acquisition news and what it means for the two from an advertising perspective.

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Jordan Bitterman,  SVP, Digitas

“What Yahoo has needed for a long time is a collection of owned channels to monetize. Marketers have flocked to owned properties in order to create homes for their content that could be instantly shared by audiences (think: Facebook, Twitter, YouTube).

Yahoo was the biggest game in ad land when Facebook came into being and has obviously been surpassed in terms of capturing marketer imagination. It stood idle while its own asset, Flickr – an owned channel in its own right – was out-flanked by Pinterest.

With Tumblr, Yahoo can now compete in spaces that have eluded them to-date: owned channels, earned media and blogging, and longer form social sharing. They can even swim more confidently in the image and check-in spaces using Tumblr as a base of operations. It will be interesting to see how it gets integrated into the current core Yahoo business in the coming months.”

Scott Symonds, Managing Director, Media, AKQA

“I think the Yahoo + Tumblr deal is incredibly interesting and crucial in a positive opportunistic sense for Yahoo Most of the excitement around digital media today resides in the enhanced user interactivity, engagement, endorsement, and ‘earned media’ extension afforded by social sharing and a robust, involved community.

This social aspect to publishing and consumer engagement is what is driving digital media user growth on the web in general and more specifically driving growth for properties with social/community at their core like Facebook, Twitter, Tumblr, Buzzfeed, Federated Media, Flipboard, etc. This is, in fact, the crucial differentiation of a 21st century publisher vs. the content play of 20th century portals and newspaper sites. Consumers “get” social sites because they are more fun and more dynamic, and advertisers want to be where consumers are.

Yahoo needs a scaled social property and community to add to their existing massive audience and content creation capability to more emphatically become a 21st century publisher. That said, the integration of Tumblr with Yahoo will be neither easy nor fast – nor could it be with the scale of both properties and their different types of audiences.

It seems Marissa Mayer gets this. But, even though the evolution and combination will take time, it is already a win because consumers and advertisers are taking notice of the investment – and the intention of the investment – and are curious about what Yahoo will do – and how they do it. I believe it will be the deciding test for Mayer and her team. If they do it right, it will demonstrate that Yahoo understands, and can execute, on the direction they must go to maintain relevance and advertiser interest as a 21st century publisher. If somehow this doesn’t work, the damage will be even greater than a billion dollar write-off.”

Allen Weiner, Research VP, Gartner

“Previous Yahoo execs have always talked about Yahoo’s “content buckets”—original, licensed and user generated (i.e. Yahoo Contributor Network) as one of its key strengths, and as a leading vertical content portal for such areas as sports, finance and gossip/celeb news, Tumblr makes sense as a content management-meets-curation platform.

Such a move would allow consumers, brands and marketers (i.e. content marketing) to curate Yahoo’s syndicated content (original and licensed) and use those pictures, videos and stories to create personal and professional Tumblr pages.

Coke and Campbell’s are just two of countless brands that have created Tumblr sites to showcase their wares and tell their stories to consumers. The content platform plan allows Yahoo a few revenue paths including a freemium service option and a venue for targeted advertising. It also allows Yahoo to get even more mileage out of one of its key ‘cool’ brands—Flickr (another e-less product).”

Peter Stabler, Senior Analyst, Wells Fargo Securities

“This is not Yahoo’s ‘Instagram’ purchase. While we believe some investors may see parallels between Yahoo/Tumblr and Facebook/Instagram, we see distinct differences. In Instagram, Facebook removed what we believe was an existential threat, a fast-growing social network operating in a key FB currency: sharing of photos with friends.

Though Tumblr has been very successful in establishing itself as an easy-to-use blogging platform embraced by young internet users (a key interest of Yahoo), we see few obvious synergies with Yahoo’s core assets in mail, news, sports, and finance.

Tumblr ad products need development. “Radar” and “Spotlight” ads appear to be Tumblr’s primary monetization paths.

While we see how a brand such as Macy’s (which is one of a few large advertisers for which we could find making a concerted publishing effort on Tumblr) could promote their blog to gain followers, the current formats available to brands are — like Facebook — limited in scope. The obvious and substantial differentiator between the two is Facebook’s deep store of data on user interests. Assembling a link between Tumblr and Yahoo data profiles would be logical (via email addresses), but we believe Yahoo would need to tread carefully or risk alienating the overlapping audience.

Will brands embrace Tumblr? There’s no doubt that Yahoo maintains relationships with virtually every large marketer in the U.S., but we question whether that will necessarily lead to an acceleration of brand participation on the Tumblr platform. In particular, we see risk associated with consumer’s ability to tag user posted content (of any stripe) with brand names.”

Steve Katelman, EVP, Global Strategic Partnerships, Digital, Omnicom Media Group

“It definitely makes sense for Yahoo to have purchased Tumblr. It has more than 100 million active users and serves up over 20 billion page views monthly. Advertising is the only practical way to monetize a service with that volume of traffic. And yet, David Karp has, until very recently, been averse to any real advertising.

Now with Tumblr’s $1.1 billion price tag, you can be sure that Marissa Mayer wasn’t talking about advertising when she said, We promise not to screw it up.” Of course, there will be ads on Tumblr and that’s not a bad thing. Those 75 million daily Tumblr posts aren’t going to pay for themselves – serving ads against them sure makes sense to me. I just need to figure out how many burritos are in a billion.”