Northwest Progressive Institute Advocate

Tumblr, do you *really* want to sell to Yahoo!? After what happened to GeoCities?

Rumors are flying this evening that Yahoo! is on the verge of acquiring Tumblr. A deal may be finalized this weekend, so long as Yahoo CEO Marissa Mayer can get approval from Yahoo’s board of directors.

Yahoo is thought to have offered $1.1 billion for Tumblr. The company apparently considers itself worth more than that and is trying to get Yahoo to pony up even more, even though it has paltry revenue compared to more established tech titans.

The report about the behind the scenes negotiations reminded me of a news item from fourteen years ago: the sale of GeoCities to Yahoo for $3.4 billion. Yahoo spent more than three times the amount of money on GeoCities in 1999 that it is proposing to spend now to acquire Tumblr. What happened to GeoCities? It was ingloriously shuttered a few years ago. So much for that acquisition.

The rationale for buying GeoCities was that it would add a lot of value to Yahoo. That’s what geniuses like Scott Appleby said at the time:

Analysts say the potential acquisition of GeoCities, or a company like it, is a must for Yahoo!.

“I really think it’s the only strategy,” says Scott Appleby, an analyst with ABN Amro, adding that the growth cycle of the Internet is still in its infancy.

 ”Customers and consumers are still building behavior patterns,” he says. “Now is the time to build your network, now is the time to build your brand and AOL has proven that now is the time to build your business.”

In retrospect, the Yahoo-GeoCities deal doesn’t look so rosy. Yahoo is still around - but GeoCities is not. So much for GeoCities being a must-have.

Research has repeatedly shown that most corporate mergers and acquisitions fail to create value for shareholders. The business press loves to report on deals and rumored deals, but that has no bearing on whether they make business sense. That explains why dealmaking generates more headlines than returns.

Which leads us to ask: Tumblr, do you *really* want to sell to Yahoo? This is the company that bought Delicious and was going to close it before it found a buyer to keep it running. This is the company that let Flickr go into a stall. And this is the company that bought GeoCities for a whopping $3.4 billion in 1999 and then extinguished it ten years later. Don’t think the payout you’ll be getting will be any kind of insurance against a similar fate for Tumblr down the road.

So, David Karp and team, think long and hard before you decide to sell. Look at what happened to the other companies that Yahoo bought.

And heck, ask Yahoo about it. You might want to drop the word “GeoCities” during the negotiations and see what kind of reaction that elicits.

# (Friday, May 17, 2013)

CBO says the federal deficit has shrunk - but the traditional media isn't reporting it

Media Matters: “Following months of media calls for deficit reduction, cable news channels spent just over 7 minutes reporting on a revised Congressional Budget Office (CBO) projection that the 2013 deficit will decline by more than previous estimates. Broadcast network news evening shows did not cover the new report.”

# (Friday, May 17, 2013)

Sacramento group, Maloof family reach deal for Kings

The Maloof brothers have reportedly agreed to sell their controlling interest in the Sacramento Kings franchise to a local ownership group that will keep the team right where it is. The deal leaves Chris Hansen and his group with no stake in the franchise.

# (Friday, May 17, 2013)

Paul Otellini's Intel: Can the company that built the future survive it?

The Atlantic’s Alexis Madrigal: “As the CEO steps down, he leaves the Intel machine poised to take on the swarming ecosystem of competitors who make smartphone chips.”

# (Friday, May 17, 2013)

We wish Seattle the best. Great sports town, great ownership group, and Chris Hansen and (Steve) Ballmer, and those folks — I hope they get a team at some point, I think they will. And this is just me, but I’m rooting for Seattle. If there is any way we can be helpful, you know, we will. They were awesome.

— Sacramento Mayor Kevin Johnson, expressing hope that Seattle will get an expansion NBA franchise before too long.

# (Thursday, May 16, 2013)

Meet a farmer who uses horses to plow his family farm

Call them old-fashioned, but some farmers still prefer to manage their fields with horses rather than fossil-fuel burning tractors, as the New York Times’ Anne Raver found out.

# (Thursday, May 16, 2013)

If the NDP wants to form government, they need to stop relying the belief that the Liberals will simply play themselves out of power in British Columbia and find their nerve. Offer clear policies which promise change in and of themselves by addressing the concrete needs of British Columbians; not vague promises that someday, things will be better.

— Michael Stewart: Eby and Heyman offer answers to NDP heartbreak

# (Wednesday, May 15, 2013)

There’s very little legislating going on the House floor.

— GWU political science professor Sarah Binder. The House of Representatives, which is controlled by Republicans, is holding yet another vote to repeal the Patient Protection Act, instead of bothering to work on pressing issues.

# (Wednesday, May 15, 2013)