As of this morning Yahoo’s board does something crazy again and purchases a start that made 13 million dollars last year for a whopping $1 billion dollars.
Yahoo not surprisingly over pays for an internet property. Tumblr made 13 million dollars last year. How they came to the conclusion that it is worth 1 billion dollars is beyond me. At 13 million a year, it would take 76 years to make 1 billion dollars. All you have to do is watch one episode of Shark Tank to understand how to put a valuation in a company.
Lately large internet companies are buying out the smaller properties. Facebook bought out instagram for one BILLION dollars also. They have yet to even charge of advertising so they haven’t even made any money from advertising yet. Tumblr has very limited ways to advertise. I believe they using the same advertising model as Twitter is with sponsored posts and getting more followers to the account.
Here is why 1.1 Billion dollars was a Bad Deal
I could never put that much stock into an internet property. Mainly because the volatility in this type of market place. All you have to do is look up the history of the dot com bust in the early 2000. Back when internet companies’ stock prices were thru the roof. It’s even hard to imagine that a company like Facebook has more money than Disney or even General Motors. These traditional brick and morter business actually have real physical properties. Disney has their theme parks and General Motors makes physical cars for people to drive. Internet properties like Facebook and Yahoo are just simply virtual. Any web property can be a fad and only good at the moment. It doesn’t take much to die a slow death on the internet, alas Myspace
Tumblr has a dark side of the internet. Things that Ultra clean, family oriented Yahoo may not approve of. In my personal opinion i believe these sites attract a bulk of their traffic. It’s just a fact that their is alot of porn traffic going to Tumblr.
You can look up the history of Yahoo purchases and you will notice they purchased a web property that was sorta of similar to Tumblr. This company was called Geocities and they bought it for $5 billion dollars. Yahoo officially shut down Geocities the site in 2009.
I guess time will eventually tell if they make money off of this acquisition. My money is that this was a total FAIL.