Tumblr’s Tumultuous Tumble

in The Money Slant by

*David Karp, the founder of Tumblr, didn’t invent Tumblr. According to Business Insider: “In March 2005, a 17-year-old German high school student named Chris Neukirchen invented this tumblelog system, specifically for super-short blogging.” Karp is in no way guilty of purloining the software, as demonstrated, again, by Business Insider: “It’s important to point out that Karp didn’t ‘steal’ Tumblr. His format was new and advanced the short-form blogging format in several ways.”

Lots of good ideas are started, and then someone takes the idea to a higher level. Andrew Carnegie didn’t invent steel, Henry Ford didn’t invent the automobile, but both became wealthy by capitalizing on an existing idea. Originally, the internet was a way for scientists to communicate with one another. Look where it has gone.

Managers and Moneymaking
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Karp sold Tumblr for a meager $1.1 billion to Yahoo in 2013. Yahoo is unloading the internet loser to WordPress.com for less than $300 million, a seven-hundred million dollar loss, or somewhere thereabouts. According to Investopedia, Yahoo’s quarterly revenue has been in decline since its peak in 2007.

It is no secret that Yahoo has been attempting to turn things around for some time now. In July of 2012, Yahoo poached Marissa Mayer from Google (employee #20) to head up and turn around Yahoo.

Yahoo sells Tumblr

Mayer served as CEO of Yahoo until stepping down in June of 2017, having been paid $239 million for her services. I am in no way disparaging Ms. Mayer’s intellect; she is obviously brilliant. It’s just that when an organization pays you $239 million, they’re looking for results, those results identified as higher earnings. Everyone’s employer is looking for some measure of performance, in the case of a CEO, it’s revenue.

How much is $239 million worth of work? Perhaps Yahoo can tell you, that’s what they paid.  One of the Tumblr executives (who recently left) is quoted as saying: “Nobody at Yahoo ever understood what they bought and what Tumblr was.”

You must understand evolving markets, marketing and products if you’re going to direct a billion-dollar organization.”

That fundamental issue is the core of lots of problems. If you don’t understand something, how can you sell it?” Not understanding what they bought, not understanding how the website generated revenue (or, in this case, didn’t) was a recipe for disaster, and the loss of hundreds of millions of dollars. Yahoo cut out certain sections of content on Tumblr, for better or worse, which, at present time, seems for the worse if all you are doing is measuring money, and for the shareholders of firms like Yahoo, money is everything. Even market share means nothing if it doesn’t generate revenue.

Yahoo sells Tumblr

Competition Brings Out the Best, or, Maybe the Luckiest
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Under Mayer’s leadership, Yahoo bought some 50 companies for a total of $2.8 billion, according to Eric Jackson of SpringOwl Asset Management. All of those acquisitions have not rewarded Yahoo, or Ms. Mayer, with any significant revenue increases at this point in time. The high-tech companies are moving towards mobile and media. The proliferation of the now ubiquitous mobile phone has opened up many opportunities for the tech giants, none of which Yahoo, with or without Ms. Mayer, has been able to either capitalize upon or buy its way into.

It could well be that Ms. Mayer’s decisions will soon suddenly enable the turnaround that she was hired to bring about. Everyone knows things do not turn around in a short amount of time. Consider how many U.S. presidents get the credit for an economy that the president before them nurtured. Our instant gratification society doesn’t stop at the corporate door; in fact, if anything, it begins in the very bowels of the major movers and shakers in our economy.

Social media has been around for quite some time, longer than some of the new developers of it have been alive, and I find amusing the self-described “social media experts” who have done little more than stare at computer screens for most of their lives. I love asking them to define marketing terms, of which they are usually unaware.

We now have “web influencers” who appear on social media and such to promote products, since social media has taken its place in the panorama of entertainment, to name just one segment. We used to just call them “salesmen” or “pitchmen.” Our specialized tech economy has given new and important-sounding names to older occupations. The “dumpster diver” of yesteryear is now a “resource recovery specialist.”

Enter the Flipentreneur
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Silicon Valley is, quite literally, filled with adventurous would-be startups looking for some niche which will make its founders wealthy, as in the case of Mr. Karp, and many others too numerous to name, dozens you have never heard of, who sold an idea for hundreds of millions, after which they can refer to themselves as web developers and entrepreneurs; as well as, let’s not forget, multi-millionaires.

Yahoo sells Tumblr

At this juncture, I would point out that web developers and code writers do not always make good entrepreneurs. Allow me one other distinction here that I cannot ignore, and neither should you. Looking up “entrepreneur” reveals the definition as: “a person who organizes and manages any enterprise, especially a business, usually with considerable initiative and risk.” I am not convinced that someone looking to start a company just so that they can sell it for several billion to a larger firm like Yahoo, or Google, or Microsoft qualifies as an “entrepreneur.” Entrepreneur means organizing and managing an ongoing business, not selling out as quickly as you can. The simple truth is that we have no word in our language for someone who wants to start a business and sell it to one of the tech giants for as much as they can as soon as they can. Hence, I have coined the word “flipentreneur” that is, someone who wants to start a business and sell it for as much as they can as soon as they can.

Bottom Line
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Bottom line: You must understand evolving markets, marketing and products if you’re going to direct a billion-dollar organization. While coders are not standing on every corner looking for work, it takes good ideas, excuse me, make that great ideas, to break into the billionaire column. Great coders have not proven to be great managers, and there are too many examples to bother to name in that category, but add one more to the list. If you think I am unkind in my description of Ms. Mayer, read Variety of May 24, 2016.


Jeffrey Neil Jackson

Jeffrey Neil Jackson is an
Educator & Literary Mercenary

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