Yahoo! was once the undisputed heavy weight champion of the worldwide web. That is until Google came along. Over a decade later, Google is worth an approximate $280 billion while Yahoo! is worth a paltry $5.2 billion.
That’s a huge difference. It’s likely because Google has made wise investments while Yahoo! has made some horrific ones.
And Yahoo! just lost almost a billion dollars by making this horrendous investment.
Tumblr is a microblogging, social network website that was founded in 2007 by David Karp. The service allows users to post content in the form of a short-form blog.
As of August 12th, 2019, Tumblr has a eye-popping 475 million blogs, which gets about 380 million monthly visitors.
With those numbers it’s probably worth a lot of money, right?
You would be wrong.
On May 20, 2013, it was announced that Yahoo! and Tumblr had reached an agreement for Yahoo! Inc. to acquire the enormously popular microblogging website for $1.1 billion.
But on August 12, 2019, Verizon Media announced that it would sell Tumblr to Automattic—operator of blog service Word Press and corporate backer of the open source blog software of the same name — for a mere $3 million.
Do the math; that’s a net loss for Yahoo! of $998 million.
So what happened?
In March 2019, Similar Web estimated Tumblr had lost 30% of its user traffic since December 2018, when the site had introduced a stricter content policy with heavier restrictions on adult content, which had been a notable draw to Tumblr.
The reason why Yahoo! got rid of the pornographic content was because the media conglomerate desperately tried to make it a mainstream social media platform, which was a terrible idea – its entire appeal was that it wasn’t a traditional mainstream site.
Yahoo! failed to understand Tumblr and, more importantly, Tumblr’s community. They’re the ones that generates the sites revenue. Yahoo’s attempts at bringing advertisers into the community space frequently generated ridicule from Tumblr users. Advertisers and brands kept trying — and failing — to assimilate themselves into the Tumblr landscape, which ultimately drove the Tumblr community away.
What would you do if Twitter or Facebook started charging and filling your feed with nothing but advertisements?
You’d probably leave, right?
Why waste your time with a company that doesn’t understand the brand’s appeal?
In 2016, Yahoo wrote off its Tumblr investment as a $230 million loss and hinted that the actual loss could be nearly the entire $1 billion. In 2017, Verizon acquired the platform as part of its overall acquisition of Yahoo, and the fissures between Tumblr’s independent, grassroots community and the goals of the telecom site deepened (Verizon is under the Yahoo! umbrella).
Verizon didn’t do any better.
The death of the Verizon-Tumblr union came in 2018 – when Tumblr, following the dictates of Apple’s content guidelines for the Apple Store – banned all adult content from the site.
Tumblr desperately tried to make sure the artistic content that was their lifeline didn’t become part of the ban – enforced by algorithm.
But its staff largely failed at keeping the algorithm from targeting completely benign posts, artists got censored, and pornbots continued to plague the site; the prohibition was an unmitigated disaster and Tumblr lost 30 percent of its user base in the six months after the ban took effect.
Now it’s worth a measly $3 million.