The web giants add another string to their bow, but could it break?
It’s a bold move from Yahoo Chief Executive Marissa Mayer, who ticked the boxes, signed on the dotted lines and generally ‘thumbs upped’ the purchase of Tumblr – a website that has never posted a profit, makes a fraction of Yahoo's sales, and probably won’t contribute significantly to revenue for years to come.
There’s no doubting that Tumblr is hugely popular – it garners users in the tens of millions, each month. But that doesn’t mean it’ll be a hugely profitable move for Yahoo!, in fact, it’s difficult to see where they’ll go with the social blogging site. "Even if revenue was $100 million, it means Yahoo paid 10 times revenue," said BGC Financial analyst Colin Gillis. "Ten times is what you pay to date the belle of the ball. It's on the outer bands of M&A." Sure, we don’t know what that means, really. But it sounds bad. “Outer bands of M&A” sounds bad.