Softpedia reports that Tumblr was “extremely poor” before the Yahoo takeover took place. Tumblr had just $16 million in the bank before the takeover, which is relatively low for such a large social media company. With such a low balance Tumblr were almost forced to sell as the lack of cash had no end in sight due to Tumblr’s inability to effectively sell advertising on its social blogging platform.
The security and exchange commission public filing shows details of the deal between the two companies. Yahoo paid $1.1 billion for a company that the SEC filing shows should have only been worth around $200 million. Yahoo admits that about three quarters of the acquisition price was essentially “good will”. Yahoo have even agreed to pay former Tumblr owned David Karp $110 million over four years to stay at the head of Tumblr, this is in addition to the $250 million he received as part of the takeover deal. Since the take over the number of blogs on Tumblr has risen substantially but overall web-traffic has slumped. It remains to be seen how successful Yahoo’s takeover of Tumblr will be.
Image courtesy of eTeknix composite
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