After Tumblr, Yahoo eyes Dailymotion

Monday May 27 2013

PHOTO | EMMANUEL DUNAND Advertising participants flash signs during an announcement that Yahoo acquired the Tumblr blogging site in order to upgrade its Flickr site, in New York, May 20, 2013.

PHOTO | EMMANUEL DUNAND Advertising participants flash signs during an announcement that Yahoo acquired the Tumblr blogging site in order to upgrade its Flickr site, in New York, May 20, 2013. AFP


Not long ago, we discussed the technology companies that were making comebacks and how significant they would be. Surprisingly, Nokia has propelled Windows Mobile to overtake BlackBerry in the rankings.

BlackBerry has made what is being termed as a too-little-too-late recovery, but not to be outperformed, the company is slowly beginning to look like its old self. It is introducing new devices and opening up its platform to other device manufacturers. Still, the company that is sending true mixed feelings across the world right now is Yahoo.

Often dubbed the “original Internet company”, Yahoo, led by Marissa Mayer, seems to be on a savage warpath that will make May its month. So, what has the company been up to?

Yahoo and Tumblr

Yahoo has made billions of dollars in revenue. Granted, everyone had a Yahoo email address or used its search engine. Aspiring web developers had Geocities, the Messenger, even a printed magazine, but Yahoo also lost money. It had forgotten to innovate and struggled with management issues. The company that Jerry Yang and David Filo incorporated almost a decade-and-a-half ago was hurtling towards it death.

Terry Semel, the CEO during the middle of the last decade, made Yahoo focus more on acquisition and less on innovation. It was not a bad thing, seeing that Mr Semel was more the buying CEO than the building chief executive. Disaster struck when Yang and later Carol Bartz took over and nearly drove the company into the ground.

Now Yahoo has Mayer. The company has refocused and recently acquired Tumblr, the famous tumblelog site, which could either go very well or very badly.
But why?

It is very simple. Tumblr has burned $125 million since 2007. In return, it has not made a single black penny. So far, Tumblr has only returned $26 million, with 2013 being projected to generate $100 million.

Yahoo overpaid for Tumblr at $1.1 billion. This has brought out some issues.

One, Tumblr and Yahoo have almost no synergies. Integrating the two platforms will be a feat in itself, and even if they achieve that, both Yahoo and Tumblr do not realise that Tumblr users want to remain exactly where they are and not be part of a bigger machine.

Tumblr will be notoriously difficult to monetise, seeing that they have never successfully done it before. So, Yahoo will be in for the ride of its life.

Yahoo and Flickr

The not-so-romantic story of what happened to Flickr is a grand reminder of how brutal technology can be. In 2005, Yahoo bought Flickr for $35 million, killed Yahoo Photos, which was not doing well, and changed how pictures were shared on the Web.

Flickr was bigger than Picasa and probably remains the biggest old school photo site on the Internet. A fate that may certainly befall Tumblr and indeed one of the biggest challenges for technology companies getting onto the same ship is that while integration is the first thing they mention during acquisition, it offsets innovation.

Developers who were happily innovating while suffering financial challenges, gained salaries and were forced to focus on integrating. A mistake.

In such a scenario, the product dies there and then. Flickr suffered lack of innovation during this forced integration. It was more of a problem because Yahoo and Flickr did not have the same corporate DNA.

Technology companies jumping in the sack together must have such similar synergies that the day after acquisition, nobody can tell the difference. Not here. Flickr has been revamped and apparently, it does not get any better.

Yahoo and Dailymotion

Orange (in France) owns Dailymotion, its most successful digital venture outside of telecommunication.

Yahoo has always had grand ambitions to build something that can counter Google’s YouTube, but so far, it has not done well, and neither has this deal, which was blocked by the French government on the basis that Yahoo had ideas about cannibalising Dailymotion.

The move forces Yahoo to look for a new target to acquire. The most convenient would be Hulu, the Internet television service, which has been desperately trying to sell itself despite a record growth, high numbers, a huge return on investment and just being plain cool.

The French have recognised that Yahoo might not be the best fit for Dailymotion in any way since in the end, Yahoo would want to own the entire application. But that is not going to happen because the French do not want it. After all, Dailymotion is one of France’s most successful technology ventures. We are talking about national pride at stake.

So, what next for Yahoo? First of all, Yahoo needs to tone down its acquisition overtures and dip to low beams so that it may first focus. While Yahoo has a lot of ground to cover, it needs to worry more about what it bought.

The problem with too many acquisitions is that in the end, there will be a bubble. Right now, it seems Tumblr user rebellions are the order of the day.