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Originally published May 20, 2013 at 5:40 PM | Page modified May 21, 2013 at 6:44 AM

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CEOs assure Tumblr will stay independent after Yahoo deal

Despite Yahoo’s $1.1 billion deal for the social network, Yahoo CEO Marissa Mayer and Tumblr leader David Karp said Tumblr will remain in New York and Karp will stay on as CEO.

The New York Times

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Never trust a CEO...especially one that ended telecommute after she benefited from it... MORE

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SAN FRANCISCO — Both Yahoo CEO Marissa Mayer and David Karp, Tumblr’s 26-year-old founder, reassured worried users Monday that Yahoo’s deal to acquire Tumblr for $1.1 billion would allow the social-networking site to operate as it is.

“Marissa walked me through exactly what that would look like, what that could look like, and she showed me an opportunity for Tumblr to stay an independent company, effort and team,” Karp said in an interview. “Now, we can keep pursuing this mission and vision for our product with all this new wind behind our sails.”

And he addressed what appeared to be a burgeoning revolt of Tumblr’s hipster users, who took to the site Sunday, the day the deal was approved by Yahoo’s board, to air grievances.

“All of our employees will stay in New York, and I will continue to be CEO,” he said.

“If you look back at some of the historical, really successful billion-dollar acquisitions — PayPal, YouTube — there’s a theme,” Mayer said in the interview. “You want them to run as fast as they possibly can. Your job is to seal them up and get out of their way.”

Tumblr’s users worry that Yahoo will introduce clutter and banner ads to Tumblr’s minimalist platform. Yahoo certainly has the incentive to do so: It has lost its leading share of the display-advertising market in recent years to Facebook and Google.

But Karp said Tumblr would continue to take what he called the ‘Mad Men’ approach.”’ He said it decided early on to target the kinds of advertisers that aim to win awards by selling stories, not banner ads.

“We’ve proven our ads can work,” Karp said, noting that Tumblr regularly sells out of its ad inventory.

For now, at least, Mayer seemed to agree.

“It’s the Vogue and Super Bowl phenomenon,” she said. “We want ads to fit into the natural content flow. We want people who say, ‘I watch the Super Bowl because the ads are so good.’ ”

The two said the deal came together over several weekends spent commuting between the companies’ disparate headquarters — Tumblr’s offices in Manhattan and Yahoo’s corporate campus in Sunnyvale, Calif. — as well as Karp’s sparse Brooklyn apartment.

Initially, they met to discuss advertising opportunities, but at some point, Karp said, the conversation shifted to an acquisition.

To come up with its $1.1 billion price tag, Yahoo looked at established metrics like revenue and expenses, and also considered Facebook’s $1 billion acquisition of Instagram last year and Microsoft’s $1.2 billion play for Yammer, said Yahoo’s chief financial officer, Ken Goldman.

The acquisition represents a fifth of Yahoo’s current cash holdings — not a trivial figure, considering that Tumblr’s strategy for making money is not fully formed.

The company burned through an estimated $25 million last year and had only $13 million in revenue. It set a $100 million revenue target this year but pulled in only $13 million last quarter.

In addition, Tumblr is a much more anonymous platform than some of its social-networking peers and lacks the coveted demographic information found on Facebook and Instagram.

“It’s true that we don’t have the same demographic information that a Facebook does, and we likely won’t,” Karp said. “But we have one of the most robust networks of content and the most highly engaged audience of humans that comes there hungry for that content.

“What that means is, creative advertisers who make great ads that blend in with that content have the opportunity to tell a story that resonates with people in an incredibly human way that no level of targeting is going to be able to replicate.”

Karp, who never graduated from high school, is expected to get $250 million from the sale. He said he planned to use some of that money for philanthropy and, someday, for college.

“I should be able to afford it,” he said.

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