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The sad demise of Tumblr: How the $1bn social network ended up selling for less than $3m 

Tumblr founder David Karp
Tumblr founder David Karp Credit: AP

There was a time, many years ago, when Tumblr was one of the most exciting places on the internet. Those days are long gone now with millennials flocking to more exciting communities such as TikTok and Twitch.

But at its peak, the online blogging service had 20bn monthly page views. It was the go-to place to share photos, graphics and snippets of text. Barack Obama and Lady Gaga were keen users and the site brought in more monthly web traffic than Wikipedia and Twitter.

It was such hot property that Yahoo decided to buy for $1.1bn (£910m) in 2013. Today, however, page views have fallen to just 400m per month and this week the site was brought for less than $3m by Wordpress owner Automattic - just 0.27pc of its original price. 

So what went wrong and how did the former darling of the internet collapse into financial irrelevance just six years after its triumphant sale?

Yahoo paid too much for Tumblr

The first culprit is that $1.1bn sale to Yahoo in 2013. That sale price seemed grossly inflated and implied that Tumblr would continue to be the dominant online community which it had been for years.

At the time Yahoo chief executive Marissa Mayer faced a battle to save not just Yahoo but her own credibility. 

The former Google executive had been brought in to revitalise the ailing internet company and she hit upon a strategy of making expensive, flashy acquisitions as a way to breathe new life into Yahoo.

In 2013 Mayer bought Summly, a news digest app with no revenues built by a British entrepreneur who was aged just 17, for a reported $30m.

Yahoo promptly shut down Summly and used its technology for its own News Digest app which it then shut down three years later. 

Months after purchasing Summly, Mayer also snapped up Tumblr for $1.1bn. A second high-profile acquisition in months gave Yahoo the credibility of a tech giant spotting trends and bringing them in house, even if Mayer may have spent way over the odds in her pursuit of the blogging platform.

The deal was unquestionably a victory for Tumblr founder David Karp. The executive triumphantly emailed his employees joking that “we’re not turning purple” by embracing Yahoo’s corporate colour. “F--k yeah,” he wrote at the end of the email.

Verizon got Tumblr through its 2017 purchase of Yahoo. Verizon had hoped to create an ad business to compete with Google and Facebook but its media business ran into trouble. It has cut jobs and sold some Yahoo properties, including the photo-sharing site Flickr and Polyvore, a fashion and collaging site that was then shut down. 

Tumblr’s sponsored posts were far too basic

Advertisers looking to get their products in front of Tumblr users’ eyes didn’t have a wealth of options to choose from.

Today, they can create branded augmented reality experiences on Snapchat or hyper-targeted ads on Facebook, but Tumblr’s sponsored posts and home page takeovers were decidedly basic.

An anonymous former Tumblr executive told Digiday in 2017 that “Yahoo never gave Tumblr the time and support to innovate ad products. By the time Yahoo realised how far in the race Tumblr fell behind, it was already too late.”

Tumblr failed to keep up its previous momentum and traffic to the site dropped. This led to a decline in ad revenue and Yahoo was forced to write down the company’s value twice in 2016, writing off 80pc of its value due to "including decreases in our projected Tumblr operating results and estimated future cash flows,” amongst other factors.

Pornography on Tumblr was banned

Tumblr never had the same squeamishness around nudity that could be found in Silicon Valley giants.

“Folks who want porn can buy an Android  phone,” sneered Steve Jobs in 2010 during a months-long debate around the inability of customers to access pornography in Apple’s App Store.

Tumblr happily played host to thousands of NSFW (not safe for work) blogs where users could publish and share pornography freely.

In December, Tumblr and its then-owner Verizon announced that the site’s lax rules around nudity were coming to an end: Pornography was banned on Tumblr.

The decision made sense. Tumblr was no longer a scrappy start-up scraping together another advertising revenue to keep the servers online. It was a division of a large media conglomerate and nudity made it difficult to win over new advertisers.

Tumblr’s pornography ban was widely seen as a death knell for its thriving community. Users migrated to other social networks en masse and its traffic fell nearly 30pc in the months following the ban.

But former users hoping for a utopian rebirth of Tumblr under its new owners Automattic are out of luck. The Wordpress owner has confirmed that it has no plans to allow the content back onto the site.