Tumblr: The First Step to Yahoo's Porn Empire - Shelly Palmer

Quite a bit has been written about Yahoo's acquisition of Tumblr. The business issues are interesting – Is Yahoo paying too much? How will Yahoo translate the acquisition into shareholder value? Etc. These are the right questions to ask, but I have different question entirely...

Type "tumblr xxxxx" in to Google where the xxxxx is replaced with any sexual activity you have ever heard of. Not just the normal stuff, any of the thousands of ways you might describe any of the 395+ sexual fetishes and see what the organic search results look like. WARNING: This exercise is not for the prudish or people who are easily offended by exceptionally graphic, uncensored adult content.

As it turns out, Tumblr is one of the biggest porn aggregators. The original content is overwhelming (and it is dwarfed by the social reposting of adult content). When you take away all the biz speak, Yahoo! just acquired one of the world's most popular porn sites. Nice! I am neither shocked nor offended by this, as Trekkie Monster sings in Avenue Q, "The Internet is for Porn!" But... no matter how you look at it, Tumblr is not a brand-safe environment.

So, what will Yahoo do with this traffic? I don't think you can sell areas of the site where naked people are dripping hot candlewax on each other to most FMCG companies. And a huge number of the 117 million user accounts are anonymous or created with inaccurate data (sort of like MySpace in the previous era) so the data and analytics will have very little value. And, let's not forget that Tumblr is also a very good blogging toolset that you can use with your own domain name, so that's not going to be part of a Tumblr ad network (without the content owner's permission). On the other hand, Beyoncé and many other celebrities, personalities and excellent content producers do have very popular Tumbler blogs, but that's not what's generating the bulk of the traffic.

The power of Facebook is that you are who you are. Facebook generates its $5 Billion in revenue because it can guarantee an audience to an advertiser. Tumbler cannot make the same claim.

So – lots of traffic, lots of users, lots of action, $13 million in revenue (a rounding error in the world of Tier One tech), what does it do for Yahoo?

Wait... David Karp, Tumblr's founder and CEO will continue in his role. "We're not turning purple," said Karp on the company's official Tumblr blog. "Our headquarters isn't moving. Our team isn't changing. Our roadmap isn't changing. And our mission – to empower creators to make their best work and get it in front of the audience they deserve – certainly isn't changing."

OK then, what is the point for Yahoo? It's not like they need to keep it out of Facebook's hands, it's not a defensive play – should Twitter have jumped on this? Twitter hasn't jumped on anything. At face value, Yahoo is buying traffic. How much advertising can Yahoo sell on Tumblr? That's "the" question – everything else is just commentary and punditry. I've seen math that says $105-110 million per year (assuming a ±$2.00 RPM on ~60 Billion pageviews per year). But, based on David Karp's intelligent and correct argument against traditional advertising units, I don't know how Yahoo could achieve that goal.

To sell $105-$110 million in non-traditional ad units Tumblr will need to create a new kind of advertising unit... and that has yet to be achieved, so I'm not sure how the purchase price got to $1.1 billion. Can you turn 117 million people (many of which are anonymous, porn mongers or kids who are really too young to be a benefit to advertisers) into $105-$110 million per year? I guess we're going to find out soon enough. Yahoo's CEO, Marissa Mayer said, "We promise not to screw it up." I'm keeping an open mind.

Shelly Palmer is Fox 5 New York's On-air Tech Expert (WNYW-TV) and the host of Fox Television's monthly show Shelly Palmer Digital Living. He also hosts United Stations Radio Network's, Shelly Palmer Digital Living Daily, a daily syndicated radio report that features insightful commentary and a unique insiders take on the biggest stories in technology, media, and entertainment. He is Managing Director of Advanced Media Ventures Group, LLC an industry-leading advisory and business development firm and a member of the Executive Committee of the National Academy of Television Arts & Sciences (the organization that bestows the coveted Emmy® Awards). Palmer is the author of Television Disrupted: The Transition from Network to Networked TV 2nd Edition (York House Press, 2008) the seminal book about the technological, economic, and sociological forces that are changing everything, Overcoming The Digital Divide: How to use Social Media and Digital Tools to Reinvent Yourself and Your Career; (York House Press, 2011) and Digital Wisdom: Thought Leadership for a Connected World (York House Press, 2013). For more information, visit shellypalmer.com.

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