Tumblr Is an Idiotic Deal. But It May Not Be Dumb - Tom Cunniff

Aconfession.

If 20-year-old high school dropout David Karp had shared his vision for Tumblr with me when he started coding it in 2006, I know what I would have done.

I would have tried to be kind and avuncular.

I would have tried to gently explain why having no business model was a bad idea.

I would have pointed out that allowing porn sites would probably doom any chances he’d have of being acquired.

He probably would have argued with me. He might have even gotten really angry with me. He was 20 years old, after all.

If he had screamed at me, I wouldn’t have argued back. I would’ve said, “Look, if you really believe in this thing I won’t tell you not to pursue it. All I’m saying is – no disrespect meant – you’d be wise to have a Plan B.”

Then – as he walked away – I would have rolled my eyes. Silly kid.

Fast-forward to 2013. I'm wrong on all counts. He's a billionaire. (Well, not quite, but he’s a hell of a lot closer than most of us.)

So it goes.

Opportunity Meets Desperation?

This is an irrational deal forged in an irrational marketplace, made in hopes of persuading irrational people to assign irrational relevance to Yahoo.

As my friend Jonathan Yarmis said in his assessment of the deal,

“In the best of circumstances, acquisitions are hard and… Yahoo has never been in the best of circumstances, whether it was a dysfunctional board trying to prove it's smarter than the last dysfunctional board, whether it's a viper's nest of competing fiefdoms, whether it's a lack of a clear, consistent strategic vision…This reeks of opportunity meets desperation."

Part of me is inclined to think that the estimable Mr. Yarmis is being too kind.

But… part of me is painfully aware that I may be as wrong about this as I would have been about Tumblr in the first place.

As idiotic as the deal may seem on the surface, the acquisition may:

- Make people more inclined to let Yahoo come and in pitch
- Help attract engineering talent who might not have considered Yahoo
- Give Yahoo a fresh story to tell in mobile and some alluring hope around native ads

- Persuade Wall Street to be more patient about the turnaround

The Strange Physics of Yahoo

The physics of running a company the size of Yahoo is a hell of a lot different than most normal businesses, in the same way that riding a tricycle isn’t quite the same as piloting the starship Enterprise. In today’s digital universe, Yahoo can find a billion dollars by digging in the couch for loose change. And Wall Street just might raise its stock price for the acquisition by enough to make the deal look like a relative bargain over time.

What seems like common sense to most of us might make no sense in that environment at all.

So, reluctantly, I have to admit that Tumblr may well be worth a billion dollars to Yahoo.

I still think it's an idiotic deal. But that doesn’t mean it’s dumb.

Tom Cunniff is the founder of Cunniff Consulting, an integrated marketing consultancy that helps consumer brands and leading companies in Big Data, Social Media and Mobile succeed. Frequent speaker and panelist. Chairman of the Association Of National Advertisers Digital Committee. He can be reached at tom@tomcunniff.com.

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