TECH in AMERICA (TiA)

SHARING AMERICA'S TECH NEWS FROM THE VALLEY TO THE ALLEY

A Valley Big Wig Explains Why He Doesn’t Think Marissa Mayer’s Tumblr Acquisition Was Wise (YHOO)

Julie Bort, provided by BusinessInsider

Brad Garlinghouse, the former Yahoo exec famous for his “Peanut Butter Manifesto” that said Yahoo was spreading itself too thin, is generally a Marissa Mayer fan.

But he’s not convinced that buying Tumblr for $1.1 billion was the best  move the Yahoo CEO could have made.

“I’m probably a little more skeptical than many about the Tumblr acquisition,” he told Wall Street Journal reporter Rolfe Winkler during a video interview. 

Although Garlinghouse left Yahoo in 2008, he’s got deep roots in the Valley and the Internet business. He’s currently CEO of cloud storage company Hightail (formerly YouSendIt), and an angel investor in a bunch of startups. He’s also an investor in CrunchFund, a venture fund that had a stake in Tumblr. marissa-mayer-30

His problem with the Tumblr deal is that “most $1 billion+ acquisitions in the Internet” haven’t panned out, or as he puts it, haven’t been “value accretive.”

He likened it to Yahoo’s $3.6 billion acquisition of GeoCities back in 1999, before the Internet bubble popped. GeoCities was a popular website that let people create their own web pages. It was sort of the forerunner to sites like Myspace, Facebook and Tumblr.  It no longer exists.

He also thinks Tumblr creates “low value-added” content that doesn’t draw top-dollar ads. He explained:

“There’s almost an unending amount of low value-added inventory on the Internet … I don’t’ think you have to be an econ major to understand that as supply grows and demand for advertising grows more modestly or is flat, that means prices go down. There’s some companies focused around ‘premium inventory.’ Tumblr has a lower-value inventory today so it’s not clear to me that it was an optimal acquisition for Yahoo.”

On the other hand, he is a fan of Mayer’s acqu-hire strategy, where she’s been buying a lot of smaller-priced startups to infuse Yahoo with fresh talent.

“Any great outcome starts with great people and Marissa has made it ok for really good people to go back to Yahoo again,” he said.

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This entry was posted on July 11, 2013 by in CEO/FOUNDER, FYI, YAHOO and tagged , , , , , , .

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