Yahoo-Tumblr: It’s Not What You Buy, It’s What You Do With It

Yahoo has a long record of buying cool companies — and failing to benefit from that coolness. Here's hoping history doesn't repeat itself with Tumblr.

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When Yahoo first approached us eons ago, we were pretty skeptical. But after meeting the people on the Yahoo team and getting a picture of where they were going, we got religion. Maybe that’s too strong. We realized we were all eating at the same church potluck.

The things that were important to us were: being open, building innovative stuff and kicking ass. Were these people our people? Yes. See the stuff Yahoo’s announced recently [including, of course, this]? They’re evolving in really interesting ways — and from our look inside, we know that there’s a lot more coming.

Yahoo won’t be the Yahoo you’ve come to take for granted.

Nope, that isn’t David Karp, CEO of Tumblr, talking about Yahoo’s $1.1 billion acquisition of the microblogging service he co-founded. Kara Swisher of All Things D is reporting that the deal is done and that her sources say it’ll be announced on Monday. We’ll hear from Karp then, presumably.

[image] Flickr

Flickr in 2004, before it was a Yahoo property

But the sound bite above is from March 2005, and the start-up founder who’s explaining a Yahoo buyout is Caterina Fake, the co-founder of Flickr. At the time, the photo-sharing start-up was as cool as any site on the Web; just as buying Tumblr is allegedly a gambit to make Yahoo cool again, buying Flickr was supposed to help reboot Yahoo, a company that was feeling a tad shopworn even eight years ago.

The Flickr acquisition came at a time when Yahoo was snapping up interesting small companies by the carload — among the other ones it purchased in 2004–05 were Dialpad,, Konfabulator, Musicmatch, Stata Labs and All came with cool reputations, innovative services and smart people.

Some of the acquisitions instantly stopped mattering under Yahoo ownership; others did O.K., at least for a while. (Flickr continued to boom at first, but eventually became staid and backward-looking; it was only in December that it released a really first-rate iPhone app.) None of them had a transformative effect on Yahoo, which is why the company still needs reinventing today.

[image] GeoCities

Even earlier, in 1999, it had bought GeoCities, the build-yourself-a-home-on-the-Web service that was pretty much the Tumblr of its time — and one of the top 10 Web properties of its era. In a perfect world, GeoCities might have evolved into Tumblr, but instead it became an anachronism under Yahoo ownership and disappeared altogether in 2009.

Sad but true: there’s a long history of Yahoo making companies it buys uncool, rather than acquisitions making Yahoo cool.

Which doesn’t mean that I’m predicting the same for Tumblr. Marissa Mayer, Yahoo’s current leader, is a very different sort of tech-company CEO from the folks who have run Yahoo in the past. As a former Googler, she also has behind-the-scenes knowledge of Google’s 2006 acquisition of YouTube for $1.65 billion. That remains shining proof that a big Web company can buy a cool, small Web company without messing it up: Google let YouTube continue to be YouTube, and more than six years later, it’s tough to imagine that either company would be better off if the merger hadn’t happened.

Google, of course, was in a stronger position in 2006 than Yahoo is now. It was plenty cool on its own, even if owning YouTube made it cooler still. But that deal is still a far better template for what Yahoo should do with Tumblr than any past acquisition Yahoo has actually made. And what happens to Tumblr over the coming months and years will speak louder than anything Mayer or Karp might say on Monday.