Aug 13, 2019

A look at Tumblr's fall as it changes hands once again

Dan Primack, author of Pro Rata
Illustration: Sarah Grillo/Axios

When Yahoo bought Tumblr in 2013 for $1.1 billion, its press release included a "promise not to screw it up." We could almost call that a tell, except it was really Yahoo asking if 4 in a row could count as a straight.

Why it matters: For Verizon, selling Tumblr was a fire sale for tax purposes. It also was another way to unload media assets that don't seem to interest Hans Vestberg, who became CEO after the Yahoo purchase. Yes, Yahoo screwed it up. But Verizon did no better.

Context:

  • Yahoo wrote down nearly half of that purchase price just 3 years later and then sold itself entirely to Verizon in mid-2017. In short, Yahoo never managed to leverage Tumblr's data in the way that Facebook did with Instagram ⁠— a pretty good comp given the timing, price and sector.
  • Verizon yesterday sold Tumblr to Automattic, the parent company of blogging platform WordPress. No financial terms were disclosed, but multiple sources tell Axios that the price was around $3 million. Or, put another way, well less than 1% of what Yahoo originally paid.
  • Automattic also will take on the entire Tumblr workforce, with a source saying that puts its post-close costs at around 20x the purchase price.
  • Tumblr still hosts around 450 million blogs.

What they're saying: We hear there were other bidders, although it's unclear if Pornhub was among them. The smut streamer had expressed interest back in May, after Verizon banned porn from Tumblr and put the business up for sale.

  • In terms of comps, the best I can come up with is Bebo, a social network AOL bought for $850 million in 2008, which it then sold 2 years later for just $10 million to a private equity firm (which later sold it to Bebo's founder for around $1 million).

For Automattic, which is viewed by Wall Street as an IPO candidate, it's about adding a consumer-facing business and large existing user base (or at least just Taylor Swift).

  • Axios' Sara Fischer notes that Autommatic rival Squarespace, which also wants to go public in the next year or two, has spent big money on consumer-facing marketing campaigns to beef up its numbers. Adding Tumblr helps Automattic keep pace there.

The bottom line: One of the fastest ways to lose $1 billion in value is to be sold for just over $1 billion.

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