Leftover Takeout

Tumbling Valuation?

caterpillarcowboy:

gbattle:

A $1billion valuation for Tumblr is about 40-50% of what I would have expected (based upon the last Pinterest raise/val). If sold to Yahoo, I’d want as much cash as possible to mitigate clear risk vs. Facebook where I’d take 20-30% cash as a floor based on Instagram deal. If they are pricing on 10X expected 2013 revenue, that’s the wrong metric - not even in the right neighborhood in my opinion. Just my $.02.

Good point. I think all cash deal is being reported.

The comparison to Pinterest is interesting. I think most people would say that deal was overvalued (2.5B was it?) and it also proves the point that valuations tend to go down when consumer / social companies go from zero revenue to some revenue (ironically).

The decision Tumblr needs to make is how long and how likely is it that they can attain a cash valuation as good as $1B. Probably not a hard decision (sell out now!).

The more interesting question is why the hell would Yahoo pay a Billion for Tumblr? More ad inventory from a key demographic? Do they really know how to retain that audience and monetize it? Are the people (engineers) worth that much? Can you buy cool?

gbattle sez:

I didn’t hear about Yahoo! being a potential all cash deal.  That’s smart.

You have to make the comparison of Tumblr to Pinterest, which in my opinion is Tumblr-lite with two major improvements for their audience:

• value clarity - the “pin” metaphor (pin, pinboard, repin, etc.) is vastly easier to understand than the now antiquated blog metaphor
• narrative structure - each board isn’t infinite, they have a beginning and end
• image curation focus - if 50% of all Tumblr posts are images, and the most popular sections of Tumblr had been fashion blogs for years, Pinterest has streamlined everything toward rotating those users to an even easier platform

From a valuation perspective, with recent reports of Pinterest growth waning, the monthly US uniques for both sites are about the same ~75mm (check Quantcast).  Tumblr’s global uniques is ~3X this while Pinterest remains the mainstay of US flyover state iPad moms (for now - they’re pushing international growth hardcore now, of course - follow the lead dog, then pass). 

That said, there are only so many companies who could stomach a $1 billion acquisition of Tumblr, let alone $2.5 billion.  Despite rumblings of Yahoo! and Facebook, let’s quickly explore 3 others.

Google: “But Greg, they already have Blogger!” - which is precisely my point!  Google is unafraid of eating their not-so-young, especially when they underperform from an ROI perspective (ie. Google Reader). Don’t be surprised of a Tumblr-meets-Google+ union.  Let’s hear it for little blue links, coming to a dashboard new you [… crickets …].

Microsoft: “But Greg, c’mon man, that union would f*$#ing suck!” - given MSFT had considered scooping up Yahoo! a few years ago (in their most confused state I might add), and before that invested $300mm in Facebook, don’t count them out.  Despite whatever you feel, Microsoft are the flat design emancipators.  Anything to anchor aesthetics for them would be positive in my opinion, plus, allowing Bing alone to spider Tumblr’s locked down wave of content would be a winner.

Apple: “Wait, what, who … is this my dream date?” - though the least likely, it’s the best union in my opinion, for many selfish reasons.  Outside of OSX, iOS and hardware, Apple needs help with their software both aesthetically and socially.  The Google-as-media empire threat should be enough for Apple to venture beyond the platform.  The customer love for Tumblr and the Hero’s Journey of David Karp, is reminiscent of a young Apple with Steve Jobs - product obsessed leadership, down to the pixel.

All the likely suitors need this demographic of creators, curators and audience over the next 7 years before the next big thing comes around.  The rotational aspect of networks, be they social, broadcast or whatever, makes this a truism over time.  The question now is, how compressed has the time scale become in a post Facebook world for teens and tweens?