• Friday, March 29, 2024
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Tumblr’s tumble from $1b to $3m valuation holds lessons for Nigerian startups

Tumblr’s tumble from $1b to $3m valuation holds lessons for Nigerian startups

It’s like the Yahoo fall in 2016 all over except this time it has Tumblr, a free service that hosts millions of blogs where users can upload photos, music and art, written on it. The Wall Street Journal reports that the company which was once sold for a whopping $1.1 billion in 2013, is being bought by WordPress owner, Automattic Inc, for just $3 million.

 

Interestingly, Verizon the principal seller in the transaction is also the owner of Yahoo. Verizon has had a checkered history of investing in startups. Its most famous was the purchase of Yahoo in 2016. Once the king of the internet with a mammoth valuation of $125 billion, a badly handled data breach forced Yahoo owners to sell at $5 billion to Verizon.

 

The case of Tumblr is slightly a reverse for Verizon. It is finding itself in the same position Yahoo owners were in 2016. Yahoo had paid a stunning $1.1 billion in 2013 to acquire Tumblr. It was later moved under Verizon in 2017 following the acquisition of Yahoo. Fast forward to 2019, Verizon is eager to offload the company and Nigerian startups could learn a thing or two from it.

 

“Tumblr is a marquee brand that has started movements, allowed for true identities to blossom and become home to many creative communities and fandoms,” Verizon Media CEO Guru Gowrappan said in a statement. “We are proud of what the team has accomplished and are happy to have found the perfect partner in Automattic, whose expertise and track record will unlock new and exciting possibilities for Tumblr and its users.”

 

Gowrappan’s newfound optimism in Automattic may belly the relief Verizon will be feeling from letting go an asset that has in recent times become a major source of worry. In fact, Verizon’s desire to sell Tumblr had been previously known, but as of May, Pornhub had been the only bidder to show public interest.

 

Tumblr’s founder story

The company was founded in 2007 by David Karp from the bedroom of his mother’s apartment in New York, to help people get their thoughts and images up as quickly as possible, and to lower the barrier to publishing even more.

 

In a 2011 interview with .net magazine, Karp said, “I had all these cool videos, links and projects that I wanted to put out there, and I had a really hard time doing it. I wanted to do something different. I was determined not to compete with WordPress.”

 

Soon after its launch, Tumblr gained 75,000 users in the first fortnight. By 2010, Tumblr was landing 100 million impressions every month and eventually closed the year with 3 billion impressions from over 42 million blogs covering politics, music and entertainment among many others. Fashion blogs were arguably its biggest product and eventually led to the company hiring a fashion director in addition to sending bloggers to high profile events like New York Fashion Week.

 

So what happened to Tumblr?

Tumblr’s efforts to constantly second-guess itself to stay relevant in a social media market dominated by the likes of Facebook, Twitter, meant that it had to experiment with a lot of ideas – some outrightly bizarre. In that sense, the company’s troubles probably began from the day it was founded in 2007. The service literally had no red lines or boundaries. Users could post anything on Tumblr. Hence, from the day it was launched, porn pictures or videos were tacitly allowed on the platform.

 

From that period the company created a product it had little knowledge of how to manage. However, its free-for-all approach brought it fame and more youthful subscribers but limited advertisers. Most corporate organisations with conservative consumers were averse to advertising on a platform where it is associated with explicit contents. When Tumblr failed to reach advertising goals set by former Yahoo CEO Marissa Mayer, $230 million of Tumblr’s value was written down. Another $482 million was further removed from its value after a quarter of poor performance.

 

Tumblr’s woes increased when it was removed from Apple’s App Store sometime in late November over discovery of child pornography on the site. Karp, the founder also left the company following the Apple App Store ban. Tumblr eventually pulled the plug on all forms of adult content in 2018 directly affecting blogs owned by artists, sex workers, and other who rely on the platform as an inclusive space to discuss and depict diverse expressions of sexuality. Tumblr lost 30 percent of its fan base after the porn ban.

 

WordPress acquisition may bring a level of stability to the company but the coming months would reveal the direction the new owners would steer the sinking ship.