‘Nobody at Yahoo understood Tumblr’: Why Marissa Mayer’s big bet on Tumblr never panned out

Yahoo is about to be swallowed by Verizon, putting an end to CEO Marissa Mayer’s tenure and ill-fated efforts to turn around the beleaguered portal. Mayer’s most high-profile acquisition and hope for turning around Yahoo was buying Tumblr in May 2013 for $1.1 billion. Now, the acquisition is seen as yet another move that failed for Yahoo, which is set to write down the entire acquisition.

“Yahoo was making a speculative bet on future revenues that could in theory be achieved by tapping into the ‘millennial’ audience early,” said John Matthews, managing director of investment bank DeSilva+Phillips. “Yet Tumblr wasn’t designed by its founder David Karp to really be an ad-monetization platform.” 

The main reason Tumblr never worked out is that the platform never figured out a way to turn its large user base into ad dollars. Tumblr suffered from lack of ad-product innovation, eclipsed by Instagram and then Snapchat; management collision with Yahoo; and multiple sales reorganizations in recent years. In its advertising business, Tumblr always held a somewhat ambivalent view, with founder and CEO Karp famously opposing advertising before the Yahoo acquisition.