Yahoo's planned acquisition of Tumblr brings it "coolness," young demos and mobile eyeballs, says the blogosphere. The deal, reported at $1.1 billion, is Yahoo's Instagram – even with aging Flickr already aboard.
From here, this acquisition may also be a new, strategic move into "identity." Yahoo Mail used to be the portal's identity magnet, but product development neglect and brand issues blew that apart. Google, Facebook and even Amazon own identity right now. When you're on those properties, and most of us are (reach!), you're logged in and they know it. And that creates unique, one-to-one conversations with consumers, a.k.a. addressable media. Yahoo needs a similar first-party data play.
As to whether this is the identity or even mobile Holy Grail for Yahoo – doubtful. Tumblr will likely not be the next Facebook. But, unlike Yahoo, Tumblr does require its users to sign up with an email address or login if they want to surf the Tumblr-sphere, let alone post. That's valuable.
Ultimately, Yahoo CEO Marissa Mayer can't just can't sit there and implement cost-controls like former Yahoo CEO Carol Bartz. She's got to roll the dice, just like the Yahoo board did when it hired her and decided to aim at "product" rather than "media" (Ross Levinsohn). And Mayer's first big acquisition-related roll is Tumblr. Internally though, it gets more difficult. She's gotta flip the Yahoo "borg" into a lean, mean, product-driven fighting machine or all these acquisitions will wither and die.
With more Alibaba cash waiting in the wings, a few acquisitions like Tumblr seem likely in the next five years as Yahoo learns about itself and the market, attempting to smooth a path for whatever its future holds.
And on Tumblr's side, the need to exit may have been too much to resist in light of the company's $125 million in invested capital, combined with a cash burn and a yet-to-emerge, scalable revenue model. With the acquisition, Yahoo becomes the new investor in Tumblr and removes the pressure of profitability and nervous venture capital board members. Do not expect Yahoo display ads or Google AdSense to be suddenly pasted all over Tumblr any time soon. This is about engaged users, reach, product...and identity.
Similar to Facebook's approach and advertising lexicon, Tumblr's nascent ad model seems to be about "amplification" of existing branded Tumblog content – whether this is through desktop or mobile browsers. Native ads-ish – we say "-ish" because it's all a display ad in the end – and it all will become programmatic as data-driven, cross-channel buys, including Tumblr, fuel the conversation with the consumer from the top to the bottom of the purchase funnel.
Taking the Facebook analogy further, every Tumblr account has an email address associated with it, and a Facebook-like "Custom Audience" product seems possible. Tumblr could provide the ability to sync CRM-like systems through email addresses and then provide "amplification" (paid ads) through its "native ads" platform just as Yahoo once did at a larger scale through Yahoo Mail. This is where Tumblr's addressable reach is important. A fair guess is that most of those users do not have Yahoo Mail, the core of Yahoo's other identity play. So incremental reach through Tumblr email logins bring Yahoo more and better conversations with consumers – something brand marketers covet.
Tumbling The Paywall
One other "big idea" down the road is a move to a subscription model for Tumblr, or even Yahoo as a whole: "You don't want ads? Fine, then buy a subscription. And why wouldn't you? It's a differentiated content experience that you have to have." Given the difficulties presented by mobile smartphone screen sizes, paid subscriptions may become an important "leg" to Yahoo's ads/commerce/paywall three-legged stool. But differentiating Tumblr/Yahoo such that users will access it through a paywall appears far in the distance.
In the meantime, Yahoo holds more "identity" than it did yesterday. Identified eyeballs matter.