Yahoo paid $1.1 billion for Tumblr. How’s it going to make its money back?
A bunch of ways, Marissa Mayer explained on a conference call today. But if you’re a Tumblr user who was hoping that those ways didn’t involve putting more ads on your free blogging service, well … don’t read on.
Still reading? Okay! So: Don’t be surprised when you see more ads on your dashboard, and/or some of the Tumblrs you visit.
First, the stakes: Yahoo said it doesn’t expect Tumblr to generate meaningful money for the Web giant this year. But next year, Yahoo CFO Ken Goldman said, “we do expect this to enhance EBITDA and revenue.” And prior to the Tumblr deal, J.P. Morgan estimated that Yahoo would generate $1.7 in EBITDA on $4.65 billion in revenue in 2014.
In other words: It takes a lot of money to move Yahoo’s needle. And Yahoo thinks Tumblr — which generated all of $13 million last year — will do that within the next 20 months.
On to the ads: Yes, Tumblr users, you’re going to see more of them. Here’s Mayer, with a preview, via a Wall Street conference call this morning:
“On Tumblr, there’s a number of different places where we think we can monetize in a way that is meaningful and really addititive to the user experience.
For example, Tumblr has what’s called the “dashboard”, which is their version of the newsfeed — or in old school terms, an “inbox” for the blogs you follow. So basically different bloggers that you follow can all appear there in your feed.
And today, Tumblr already does some advertising, though minimal, in that feed. We would like to look at them and understand how we could introduce ads — in a very light ad load — where the impact is really created, because the ads really fit the users’ expectations and follow the form and function of the dashboard.
We also see some opportunities to possibly work with bloggers who want ads, to provide ads on their Websites. That would always be done with the blogger’s permission”
Again, Yahoo has promised “not to screw up” Tumblr, and there are plenty of cautionary tales to help them avoid doing that right away. So I wouldn’t expect a flood of ads swamping Tumblr in the next year or so.
On the other hand: It’s a free Web product, which means it’s not really free at all. So if you’re using it, you’re going to pay with your eyeballs. You’re not surprised, right?