The $3B+ Exit Tumblr Could Have Had

1. Advertising rates are far below the author's $10-20 CPM estimate for dashboard advertising; $10-20 is for legitimately premium advertising such as high-end audiences, wrapping a website, etc. Dashboard / banner ads will fetch $0.5-3 CPM the way Tumblr is running them.

2. The "valuation" formula of 10x trailing ("or"?) forward revenue is misplaced. Revenue multiples in acquisitions are often reserved for companies which are mature and predictable, not in early stages of their revenue plan. Corporate acquirers will often times use the expectations of the revenue created for the acquirer, which has little to do with the target in the status quo. Yahoo's expectations of revenue creation could be anything, and they have their own internal formula which we can't glimpse.

Re: The $3B+ Exit Tumblr Could Have Had

#8

Post by goronbjorn » Sun, May 19, 2013, 4:49 AM UTC

> In the end Tumblr won’t see a bigger exit because they didn’t prove they could monetize their massive traffic before time (and money) ran out.

Instagram had $0 in revenue when they were acquired for $1 billion in cash/stock. The price paid in that instance was for potential, and it's likely to be the same in the case of Tumblr.

Re: The $3B+ Exit Tumblr Could Have Had

#9

Post by tuananh » Sun, May 19, 2013, 4:51 AM UTC

goronbjorn wrote: post #8

> In the end Tumblr won’t see a bigger exit because they didn’t prove they could monetize their massive traffic before time (and money) ran out. Instagram had $0 in revenue when they were acquired for $1 billion in cash/stock. The price paid in that instance was for potential , and it's likely to be the same in the case of Tumblr.

I think the diffs are Instagram hasn't attempted to monetize so their potential is unknown; while Tumblr already did and it doesn't look very bright.

Re: The $3B+ Exit Tumblr Could Have Had

#10

Post by hkmurakami » Sun, May 19, 2013, 4:56 AM UTC

tuananh wrote: post #9

goronbjorn wrote: post #8

> In the end Tumblr won’t see a bigger exit because they didn’t prove they could monetize their massive traffic before time (and money) ran out. Instagram had $0 in revenue when they were acquired for $1 billion in cash/stock. The price paid in that instance was for potential , and it's likely to be the same in the case of Tumblr.

I think the diffs are Instagram hasn't attempted to monetize so their potential is unknown; while Tumblr already did and it doesn't look very bright.

Also, mobile-based photosharing was deemed a "major threat" to Facebook's existence and relevance, whereas Tumblr is a much less mobile-centric and is deemed more of an "asset acquisition" and doesn't carry the urgency that Instagram carried for FB.