Tumblr feels that Yahoo's $1.1 billion offer as "too low" and view it as "only a first offer", according to sources close to to acquisition talks. Yahoo may have to significantly increase the offer to close the deal. An acquisition by some tech giant is likely in the cards for Tumblr, though, as sources say the company only has a few months of cash runway left.
The news comes after AllThingsD reported Yahoo was in advanced talks to buy Tumblr for $1.1 billion cash, and the portal's board of directors are set to meet on Sunday night to discuss the potential deal. Forbes reports that Facebook and Microsoft have also expressed interest in acquiring Tumblr. However, Forbes says that Yahoo has lock-up agreement arranged with Tumblr that prevents the blogging platform from holding a "bake-off" or bidding war for the right to buy it.
If Yahoo comes to the table with an insufficient offer, which our sources say $1.1 billion qualifies as, Tumblr may be able to reject it and shop itself around some more.
A few months ago Tumblr let several companies know it was interested in possibly being acquired. Yahoo was the first to come to the table with a firm number, say one of our sources. They say Tumblr is apprehensive about accepting the $1.1 billion cash offer, though. Considering the much smaller, younger Instagram's acquisition price was supposed to be $1 billion (in cash and stock, though, which would eventually make it worth less), it seems reasonable that Tumblr would view $1.1 billion cash as a lowball.
Tumblr employees have been told that the company only has enough funds to operate for a few more months, as its costs far exceed the limited revenue it earns. Tumblr pulled in $13 million in 2012, but has accelerated its advertising offering in hopes of hitting $100 million in revenue this year. The money's not coming in fast enough to support its expenses though. Employees were recently told not to be concerned, though, because the company is expecting to be bought.
Of course, Yahoo might be able to push the deal through for $1.1 billion or just a little more depending on how the acquisition is structured. If it promises Tumblr's CEO David Karp he can retain control of the company, provides the right retention bonuses, or won't force Tumblr to shoehorn in integrations with Yahoo's other properties, Tumblr may be more receptive.
If Yahoo successfully buys the startup, it could inject some much needed "cool", youthful energy, and design sense into the aging tech giant. The acquisition might not be so popular with Tumblr's users, though, who range from young hipsters to diehard Internet aficionados. Many thought Instagram's userbase would balk at its acquisition by Facebook, but the photo sharing service has continued to grow, offering some hope to Yahoo and Tumblr if their deal closes.
Tumblr is a re-envisioning of tumblelogging, a subset of blogging that uses quick, mixed-media posts. The service hopes to do for the tumblelog what services like LiveJournal and Blogger did for the blog. The difference is that its extreme simplicity will make luring users a far easier task than acquiring users for traditional weblogging. Anytime a user sees something interesting online, they can click a quick "Share on Tumblr" bookmarklet that then tumbles the snippet directly. The result is...
Yahoo was founded in 1994 by Stanford Ph.D. students David Filo and Jerry Yang. It has since evolved into a major internet brand with search, content verticals, and other web services. Yahoo! Inc. (Yahoo!), incorporated in 1995, is a global Internet brand. To users, the Company provides owned and operated online properties and services (Yahoo! Properties, Offerings, or Owned and Operated sites). Yahoo! also extends its marketing platform and access to Internet users beyond Yahoo! Properties through its distribution network...
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