This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Yahoo! 'Tumbling' Down the Right but Expensive Path (Update 2)

Stocks in this article: YHOO ZNGA YELP

Updated from 9:29 A.M. to include analyst in the eighth paragraph..

NEW YORK ( TheStreet) -- Yahoo! (YHOO) CEO Marissa Mayer is making an enormously bold bet, buying Tumblr for $1.1 billion, mostly in cash. Tumblr has what Yahoo! needs to turn its core business around. But considering the company only did $13 million in revenue last year, it better pay off, or this could be Mayer's first major flub.

When Yahoo! announced its Summly acquisition several weeks ago, Mayer's strategy for Yahoo! was really beginning to reveal itself. Mayer believes that content is king, and Tumblr is just that. There's also the mobile aspect of Tumblr, which Mayer has repeatedly said is something Yahoo! needs to focus on to compete in the future.


Buying Tumblr helps address the issue of personalized content to help drive display revenue growth, something Mayer has talked about before.

"The combination of more personalized content and increased product innovation will be key in getting us back to a path for display revenue growth," Mayer said during Yahoo!'s fourth-quarter earnings. The CEO also added that Yahoo! would have "some content costs, which you'll see as we make some of these developments."

According to comScore, Tumblr had 117 million visitors in April, with more than 100 million blogs, and over 50 billion posts. Tumblr CEO David Karp has built a blogging powerhouse, but has only just started to monetize his user base.

The New York-based Tumblr told Forbes it posted $13 million in revenue in 2012, and there have been reports from AllThingsD, which first broke the acquisition news, that the company could do as much as $100 million in sales this year.

If $100 million or a number close to that is achieved for 2013, that's roughly revenue growth of eight times what the company did in 2012. That's incredible, and would be enough to definitely consider spending $1.1 billion in cash. The problem is that $100 million is still small potatoes to Yahoo!, which did $1.14 billion in revenue last quarter. The issue for Yahoo! over the past few years has never been about its user base (some 700 million monthly users to various properties), it's been about making money off those users. Tumblr addresses expanding the user base, but given its core demographic, it's tough to say when Yahoo! will see a return on its $1.1 billion investment.


1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,356.87 +288.00 1.69%
S&P 500 2,012.89 +40.15 2.04%
NASDAQ 4,644.3120 +96.4780 2.12%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs