March 20, 2016

Sad about Tumblr — The Startup — Medium

Sad about Tumblr — The Startup — Medium

I’ve been thinking about this conversation I had with Jason Calacanis in 2013.
“It turns out, there’s a lot of money in the world. The money is bored. Money wants to be spent! Money is intended to be gambled.”

Three years ago <a href=“http://marissamayr.tumblr.com/post/50902274591/im-delighted-to-announce-that-weve-reached-anYahoo announced they were acquiring Tumblr. From the beginning, I was skeptical that it would work out.

To start, users hated the idea. (One of my favorite quotes: If our Tumblr founder needs money so badly why don’t we just have a kickstarter event to feed the founder?”)
Second, it didn’t seem to make sense from a business perspective
Tumblr’s culture (both users and the team) were very anti-advertising. Yahoo responded by saying:
“When you hear us talk about native ads, where the ads are every bit as good as the content, and maybe even make the content better — that’s what we are aiming for.”
– Marissa Mayer, CEO of Yahoo
That strategy didn’t last long. Here are the three ads rotating on my Tumblr feed today:

These are clearly bottom of the barrel” type ads. In fact, these are the only three companies I see advertising on Tumblr. They’re awful.

Yahoo promised that Tumblr’s ad revenue would hit $100 million in 2015. In last month’s earning call they admitted they’d missed that mark (although they wouldn’t say by how much).

We promise not to screw this up”

That now infamous line was in Marissa Mayer’s acquisition announcement. But now, things are screwed up. Like Geocities and Broadcast.com before it, Tumblr’s value is plummeting towards zero
This whole situation makes me sad.
Acquisitions either go well or they go bad. There doesn’t seem to be a middle ground. When they go bad, they destroy the trust of users, alienate the founding team, and reduce the value of the business to nothing.
For the past 5–10 years, the holy grail of building a startup was to get acquired. But with 70–90% of acquisitions failing, maybe it’s time for a new goal. Why not focus, from the beginning, on delivering value that people will pay for?

Tumblr could have offered pro-users an advanced CMS for a monthly fee. Squarespace is the current leader in this space (in 2013 they reported profits of $38 million). Tumblr is easier to use than Squarespace, has a better mobile app, and has content distribution built-in. They could have been a veritable competitor
There’s only a few ways to make money: you can charge for your product, you can sell ads, or you can do a bit of both. If you can’t make those economics work on your own, will an acquisition really change that?

One more thing: I still don’t know what it’s like to be a venture capitalist. I don’t get big numbers.” However, my guess is that in the next 5 years, the money is going to have to go from bored to smart.

I posted this because I remember when this happened in 2013. In fact, I was using Tumbr. This was just 15 days before the NSA leaks, and 2 and a half months before I started following a legal case that still is today. I left Tumblr in 2014 because I had issues with it. When I upgraded to the new version of press this, I didn’t particularly like it. It works fine, it’s just inefficient.0


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