Has there ever been an acquisition similar to Tumblr (company that has existed for 5+ years that hasn't found a profitable business model) which has contributed positively to the acquirer's net income? Is there any chance that this cannot turn out to be a boondoggle, because that seems to be the consensus among the commenters on HN.
Personally I find that in the end, the question should be: can Yahoo! make better use of the $1B elsewhere? If not, the purchase is worth taking the chance.
Neither YouTube or Reddit fit the bill. Both of those companies were created in 2005 and then sold in 2006. I would argue that they were still in a user acquisition phase instead of trying to monetize their platforms. 5 years is a long time to run without figuring out how you are going to become profitable. Tumblr was created in 2007 and has a lot of smart people working there, why haven't they figured out how to make money in the past 6 years?
However, Conde Nast no longer owns Reddit directly, so Reddit has no effect on Conde Nast's net income (only their shared parent company's).
Also, in Reddit's case, an argument can be made that it's a 'loss leader' - it may be operating in the red, but the value it adds to their portfolio of publications as a whole justifies the cost.
(Consider, for example, the alternative: shutting down an unprofitable Reddit, at which point all the users flock to the "next" discussion website which they don't own and control.)
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Has there ever been an acquisition similar to Tumblr (company that has existed for 5+ years that hasn't found a profitable business model) which has contributed positively to the acquirer's net income? Is there any chance that this cannot turn out to be a boondoggle, because that seems to be the consensus among the commenters on HN.
YouTube. Possibly Reddit?
Personally I find that in the end, the question should be: can Yahoo! make better use of the $1B elsewhere? If not, the purchase is worth taking the chance.
Neither YouTube or Reddit fit the bill. Both of those companies were created in 2005 and then sold in 2006. I would argue that they were still in a user acquisition phase instead of trying to monetize their platforms. 5 years is a long time to run without figuring out how you are going to become profitable. Tumblr was created in 2007 and has a lot of smart people working there, why haven't they figured out how to make money in the past 6 years?
Reddit was, at least recently, in the red.
However, Conde Nast no longer owns Reddit directly, so Reddit has no effect on Conde Nast's net income (only their shared parent company's).
Also, in Reddit's case, an argument can be made that it's a 'loss leader' - it may be operating in the red, but the value it adds to their portfolio of publications as a whole justifies the cost.
(Consider, for example, the alternative: shutting down an unprofitable Reddit, at which point all the users flock to the "next" discussion website which they don't own and control.)