Tumblr CEO David Karp has said that he thinks the amount that Yahoo wants to lay down for the acquisition of the blogging service, the amount that the Yahoo board have officially agreed upon that they are willing to spend on acquiring the company is $1.1 billion. Not too shabby for the company, if they accept the offer they will have beaten Instagram for the highest acquisition fee paid out in silicon valley in the past year.
How much is Tumblr Actually Worth
Tumblr has been valued by an independent source at around $800 million, this has lead some commentators to question Yahoo’s action in laying down a huge amount of money just for the demographic of 18 to 14 year olds. The Instagram acquisition had many possible buyers such as Twitter, where as this offer by Yahoo is the only offer on the table at this present time. The offer of a little over one billion won’t go higher and if Tumblr rejects it I doubt they’ll get another like it.
The blogging service has been surviving off of it’s $125 million is funding for a tad too long with out finding a sustainable channel for revenue or try to get more rounds of funding. When Yahoo’s window of opportunity runs out Facebook and Microsoft are two potential companies to make an offer but probably not as much as Yahoo’s stab in the dark offer.
No to Acquisition, Yes to Advertising
Tumblr could go it alone by adding some form of advertising to their service, but Karp has said that advertising “really turns our stomachs” which is a fundamental problem with there business model of just living of off funding. Tumblr attracts a mind boggling amount of traffic and this it is just nonsensical not to capitalize on the traffic they regularly bring in, just so the company didn’t have to rely on outside investment to keep the lights on.
To illustrate the amount of traffic Tumblr gets it is the ninth most visited site in the U.S, and it has a whopping 217 million unique visitors world wide every month and 74 million psts are made each day. The site has a lot of room for growth even though it is massively popular already.
There are rumours that Tumblr will bite the bullet and introduce a pay-per view system later this year; the system will work by paying to get others to view, so like a recommendation bar or something to that affect.
Source – VentureBeat