I think one of my favorite write-ups comes courtesy of The Onion, with their piece, "Yahoo Back On Top After Purchasing Millions Of 13-Year-Old Girls’ Blogs." While in jest, the article brings up two serious questions, "REALLY?" And, "WHY?" Please remember that "Why not," and "We needed to do something big," do not qualify as answers. While I know of one friend that was an investor, so I feel happy for him, I struggle with the acquisition of multiple levels.
On the business front, I almost get what Yahoo is trying to do. They don't have a sexy media play that can take part in the new hashtag reality. They've given up on search, don't have a social play, aren't a mobile player, so with Tumblr, they get a piece of social, a piece of mobile (views), and not just scale to sell against, but an ad format / methodology currently in vogue. BUT, user generated content is really hard to monetize. Ask Twitter and Facebook. They have done an astounding job at creating ad products that big brands want and feel safe using while balancing the user experience. Not an easy task. Where Yahoo will struggle, and why I have a hard time understanding the price is that major brands don't promote their Tumblr presence on TV. It's not the digital calling card, and in a world of YouTube, Twitter, Facebook, Pinterest, etc., asking a company to add and master another platform is no easy task. Google+ anyone?
On the personal front, I have more issues. I'm a bootstrapped entrepreneur, so the company's money has always felt like my money. This reminds me of the issues I have with the government. It's other people's money. Success or failure of this deal hurts CEO Mayer very little. She did not have to put personal money into the deal, and if it fails, it becomes a write down. If it really fails, the way Bebo did for AOL, someone looses their job, potentially her, but by that point, her own wealth has already increased by $20mm at the low end. And, no matter what, she will be remembered as a risk-taker, willing to make bold decisions. That's all very good, and were I in her shoes, I cannot say I would do things differently with the system we have in place today. That's the problem. The system is broken.
One part of the system that is broken is on the early side of entrepreneurship - the acquihire. It's something Marissa Meyer has publicly decided she supports, and sadly only perpetuates the entrepreneurship bubble. Make no mistake, this is not an internet or tech bubble we are in. This is an entrepreneurship bubble, and when companies with no right to hop on the bandwagon do, it creates a potentially toxic scenario. The entrepreneurship bubble is the quick flip of businesses and people, fueled by hype, speculation, and a false sense competition. Unlike Facebook, Yahoo is not a tech company and does not have a tech culture.
Yahoo will fail at keeping the talent, which is fine if they are buying assets and not people. And, as Mark Suster points out so well, as an operations business, Yahoo needs good, talented operators. Make a young person rich and you do nothing to help your business except give the person you need a strong desire to leave or stay but give less and the person who won't stay anyone time and a runway to start their next thing.
Getting back to Tumblr. They did something special. They created a platform that attracted an enormous user base (110 million blogs created) without spending any real money on paid user acquisition. The team and the investors had an astoundingly successful outcome, and they played the game perfectly. What's wrong then? The game is arguably flawed.
Incentivizing the wrong behavior. That's life's version of greenhouse gasses, and it's arguably getting worse and worse. A result of which and the hardest problem to solve let alone address, as even mentioning it brings about a Pandora's Box of conversation, is the wealth divide gap. As of May, according to Wikipedia, Tumblr had 175 employees. The money isn't going to them, 20% is going to the founder, 10% max to other employees, so 70% to investors. All of which is how the game is played, but we do nothing to help sustainable job creation and the resuscitation of a healthy, true middle class. The vast majority of the proceeds go to a limited number of players, with little being put back into play.
I will guess of the $1.1 billion that $100 million gets reinvested in the next generation. One winner from the Tumblr sale should be the NYC and broader tech communities. The new $100mm available for startups and investments will create a modest amount of jobs, and a meaningful percentage (is it 20%, 30%, more?) will go to people young in their careers, for whom this is also not their money, and failure often means a lead up to another job. What we haven't had is another Google, a game changer that has created a large number of jobs not to mention a well respected culture and benefits to try and get hired for. Large, long-term growth. That's not Yahoo, and it wasn't Tumblr.
The ability to be an entrepreneur is one thing that makes this country great. But, there's a case to be made that it's gotten a little out of hand and that the game is no longer an even playing field, or at least one with the proper alignment of incentives. We are also losing the battle to create a healthy and sustainable middle class. Are the two directly connected? I don't possess the scope to really say, but something is happening that we will need to fix. Or maybe, I'm just one of the haters. No matter what, it's cray-cray.