Is Tumblr Really Worth $1 Billion?

Answers to your questions about the news.
May 20 2013 5:44 PM

A Wealth of GIFs

Is Tumblr Really Worth $1 Billion?

Yahoo! and Tumblr.

Photo illustration by Karen Bleier/Getty Images

The news of Yahoo’s acquisition of Tumblr launched many an irritated post on the microblogging site this week; the response is similar to Instagram users’ histrionic reactions after Facebook bought the photo-sharing company last year. The price tag for the free microblogging site is reportedly $1.1 billion. Is Tumblr really worth more than $1 billion?

It’s hard to say. In most cases, the acquirer of a company will base its offer price on the projected increase in earnings per share that it expects to get out of the deal. In this case, Yahoo has little basis for such a projection because Tumblr is a free service, so the best it can do is estimate the worth of the site’s user base. It’s difficult to calculate Tumblr’s potential ad revenue because until recently it ran no advertisements. But there are three ways to measure Tumblr’s value for advertisers: how many people use Tumblr, how often they use the site, and how long they stay on the site. Over the past year, Tumblr has doubled its number of unique visitors. The site’s minimalist style is “sticky,” encouraging users to continually scroll down the home page loading posts from the blogs they follow; the site has more than 100 million blogs in all. But the real draw for Tumblr is its user demographic. According to Quantcast, Tumblr attracts a higher proportion of 18- to 24-year-olds among its users than do Twitter, Facebook, or YouTube.

The microblogging platform only recently started hosting paid content on its home dashboard, generating $13 million in revenue in 2012. It may seem ridiculous to acquire a company with such paltry revenues, but Yahoo is playing the long game in the hope that its acquisition of Tumblr will attract a younger audience and the ad dollars that come with them. As Ken Goldman, Yahoo’s chief financial officer, said recently at a conference, Yahoo needs to be “cool again.” Gaining Tumblr’s young audience will help Yahoo’s brand, and it will allow the company to sell data on a coveted demographic to advertisers. Sometimes companies acquire other firms because they can, and sometimes they do so because they need to. This acquisition seems to fall into the latter category—Yahoo’s “portal” model of directing users to stories from the site’s home page is declining as more people get their news through social media.


In the past, Yahoo has become the final resting place for seemingly promising sites it has acquired, including,, and Geocities, all of which floundered after Yahoo acquired them. Flickr, another Yahoo acquisition, seems to be going the same way with the rise of Instagram. If Yahoo is able to maintain the community Tumblr has created while slowly incorporating more advertising, its $1 billion gamble could pay off. But whether Yahoo has learned from its past mistakes is yet to be seen.

Got a question about today’s news? Ask the Explainer.

Explainer thanks Puneet Manchanda and Erik Gordon of the University of Michigan Ross School of Business and Matthew Rhodes-Kropf of Harvard Business School.

Emma Roller is a Slate editorial assistant. Follow her on Twitter.


The World

How Canada’s Shooting Tragedies Have Shaped Its Gun Control Politics

Where Ebola Lives Between Outbreaks

Gunman Killed Inside Canadian Parliament; Soldier Shot at National Monument Dies

Sleater-Kinney Was Once America’s Best Rock Band

Can it be again?

Paul Farmer: Up to 90 Percent of Ebola Patients Should Survive

Is he right?


“I’m Not a Scientist” Is No Excuse

Politicians brag about their ignorance while making ignorant decisions.


Driving in Circles

The autonomous Google car may never actually happen.

In Praise of 13th Grade: Why a Fifth Year of High School Is a Great Idea 

PowerPoint Is the Worst, and Now It’s the Latest Way to Hack Into Your Computer

  News & Politics
The World
Oct. 22 2014 6:30 PM The Tragedies That Have Shaped Canada's Gun Politics
Continuously Operating
Oct. 22 2014 2:38 PM Crack Open an Old One A highly unscientific evaluation of Germany’s oldest breweries.
Gentleman Scholar
Oct. 22 2014 5:54 PM May I Offer to Sharpen My Friends’ Knives? Or would that be rude?
  Double X
The XX Factor
Oct. 22 2014 4:27 PM Three Ways Your Text Messages Change After You Get Married
  Slate Plus
Tv Club
Oct. 22 2014 5:27 PM The Slate Walking Dead Podcast A spoiler-filled discussion of Episodes 1 and 2.
Brow Beat
Oct. 22 2014 4:10 PM Skinny Mark Wahlberg Goes for an Oscar: The First Trailer for The Gambler
Future Tense
Oct. 22 2014 5:33 PM One More Reason Not to Use PowerPoint: It’s The Gateway for a Serious Windows Vulnerability
  Health & Science
Wild Things
Oct. 22 2014 2:42 PM Orcas, Via Drone, for the First Time Ever
Sports Nut
Oct. 20 2014 5:09 PM Keepaway, on Three. Ready—Break! On his record-breaking touchdown pass, Peyton Manning couldn’t even leave the celebration to chance.