Is Imgur Marissa Mayer's Next Big Acquisition?

Analyzing the top news stories across the web
Dec. 10 2013 10:38 AM

Marissa Mayer's Next Big Acquisition Could Be Imgur, the Photo-Sharing Site Reddit Loves

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Since 2009, Imgur has actually grown larger than Reddit.

Photo by Justin Sullivan/Getty Images

This post originally appeared in Business Insider.

This fall, Yahoo began serious talks to buy photo-sharing site Imgur, a source with first-hand knowledge of those discussions tells us. Since she joined Yahoo in July 2012, CEO Marissa Mayer has acquired dozens of startups. Most of these acquisitions have been acqui-hires. The buy that cost Yahoo the most was its $1.1 billion purchase of Tumblr. Yahoo bought Tumblr because it has a deeply engaged, youthful audience, that uses the product on mobile. It would buy Imgur for all the same reasons.

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Imgur (pronounced "Image-er") was created in 2009 by Alan Schaaf, a student at Ohio University in Athens. He made the site "as a gift to Reddit," because he was annoyed at how hard-to-use so many of the Web's photo-sharing sites were. In a message to the Reddit community, he wrote:

"I got fed up with all the other image hosts out there so I made my own. It doesn't force you to compress your images, and it has neat things like crop, resize, rotate, and compression from 10-100. It's my gift to you. Let's not see anymore imageshack/photobucket around here ;)"

In the years since, Imgur has actually grown larger than Reddit. The site crossed the 100 million-user mark in September. That's bigger than Reddit's audience of 85 million, and up from 30 million at the beginning of 2012.

Those stats are according to The Atlantic's Megan Garber, who just wrote an excellent 3,000-word story about Imgur (the kind of positive, access-given story that comes out about a startup when it is fundraising or on the block).

Imgur is now based in San Francisco, where 10 people work for the company. It's not a huge business, but does generate some revenue through ads, memberships, and a new product it's testing: sponsored images. Imgur also sells image-hosting capacity to other companies. One of its clients is Yahoo.

We don't know how much Yahoo wants to pay for Imgur. Schaaf hasn't taken any venture capital, so he doesn't need to hold out for an Instagram-sized offer to make as much money as Instagram CEO Kevin Systrom or Tumblr CEO David Karp made selling their venture-backed startups for $1 billion each. (Sometimes it's better to sell a startup for $20 million than $200 million.)

But it's unlikely Imgur can be had for cheap. Three reasons:

Imgur would not be an aqui-hire for Yahoo. Acqui-hires are something failed startups do when they have cool technology but not very many users. Imgur has decent technology and design (it's very easy to use), but its main asset is all those users.

Imgur is "social." Garber's story on Imgur begins with an anecdote about how users met and started dating through the site. Every image on Imgur accumulates "points" through votes up or down by its community of users. Schaaf told Garber the average amount of "points" every image gets on the site is between 6,000 and 10,000.

Imgur isn't going to run out of money any time soon. All Things D's Liz Gannes reports VCs are "are literally—literally—sliding term sheets under their door."

My guess is that Yahoo would have to offer something between $100 million and $500 million. But, in a world where Snapchat supposedly turned down a $3 billion offer from Facebook, who knows?

Acquisition talks fall apart all the time, and so could discussions between Imgur and Yahoo. It's unclear if Imgur wants to sell. Schaaf hasn't been looking for an exit. Before Yahoo came calling, Imgur hadn't even hired an investment bank.

Yahoo declined to comment on this story.

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