Yahoo eventually integrated Tumblr’s sales team into the larger company, but the Tumblr team was unhappy with Yahoo’s more stodgy corporate culture. “By the time Yahoo realized how far in the race Tumblr fell behind, it was already too late.” “Yahoo never gave Tumblr the time and support to innovate ad products,” one former Tumblr told Digiday. But Yahoo initially took a hands-off approach to Tumblr’s operations. Culture ClashĪfter acquiring Tumblr, Yahoo needed to figure out how to attract ad dollars to the platform to allow it to compete with rising social media giants such as Twitter, Facebook, Instagram, and Snapchat. Moreover, third parties often have financial incentives to advocate that aren’t likely to create value for their client. Why were bankers left out of the Tumblr deal-making? Mayer may have felt she had a strong sense of Tumblr’s worth or that Karp would appreciate a more direct, informal approach. Third, bankers often keep the principals away from potentially difficult negotiations that could sour relations during the integration stage. Second, bankers often have considerable experience running past deals to help negotiate deal terms. First, on the seller’s side, bankers can help position the asset in the marketplace, framing its value and marketing it to potential buyers. Bankers can play three important roles as advisers in merger-and-acquisition (M&A) negotiations, according to Harvard Law School and Harvard Business School professor Guhan Subramanian. Unlike most acquisitions of its size, the deal-making between Yahoo and Tumblr was conducted with little involvement from bankers, the New York Times reports. Leaving the Bankers Behind in Deal-Making “Yahoo was making a speculative bet on future revenues that could in theory be achieved by tapping into the ‘millennial’ audience early,” investment bank Oaklins DeSilva+Phillips managing director John Matthews told Digiday.Ĭlaim your FREE copy: Business Negotiation Strategies: How to Negotiate Better Business Dealsĭiscover step-by-step techniques for avoiding common business negotiation pitfalls when you download a copy of the FREE special report, Business Negotiation Strategies: How to Negotiate Better Business Deals, from the Program on Negotiation at Harvard Law School. Yahoo’s annual revenues had been flat for years, and Yahoo’s new CEO, Marissa Mayer, was on a mission to make the company relevant again. Yahoo valued Tumblr most, for its ability to attract users on mobile devices. Low revenues prompted Karp to open acquisition talks with Facebook, Microsoft, Google, and Yahoo. Tumblr earned only about $13 million in 2012 and struggled to raise additional funding, according to the New York Times. The site caught on among bloggers, photographers, and the fashion world, but Karp resisted placing many ads on the service. Would a Deal “Ad” Up?ĭavid Karp founded blogging platform Tumblr in 2007 as a video-friendly alternative to WordPress. The story of what went wrong highlights deal-making pitfalls that you should seek to avoid when making business deals. But those plans didn’t play out: In August 2019, Tumblr was bought for just $3 million. The acquisition was intended to put a fresh face on the aging Internet company and provide it with a profitable revenue source. On May 19, 2013, internet company Yahoo announced it was purchasing the blogging service Tumblr for about $1.1 billion in cash.
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