Tumblrnomics – The Winners of the Tumblr and Yahoo Deal are …..Web Entrepreneurs, Creatives and Angel Investing…The Loser is The Middle Class

In one sentence here is the Yahoo Tumblr Deal now that it is official:

David Karp says ‘[email protected]#k Yeah’…Marissa Mayer says ‘…he said [email protected]#k Yeah?’ …Tech Bloggers says ‘[email protected]#k Me!’ and Wall Street Says ‘[email protected]# YOU!’

Here is the [email protected]#k Yeah from Tumblr founder David Karp.

From Marissa Mayer (CEO of Yahoo)We promise not to screw it up!

Talk about two different stress levels!

On the armchair quarterback side of the web, there is outrage, snark (oh dear god the porn…the porn), jealousy and some backslapping. I of course added my own snark:

On Wall Street, as usual, indifference from analysts. They have no models for this stuff. JP Morgan or some other TARP entity raised their price target on Yahoo to $27. Ballsy. The stock was up fractionally today which means that a huge deal like this was expected a while back and is priced in. The market is a leading indicator once again…and one billion dollars on Wall Street is a small rogue trade while a compliance officer is pissing.

The big loser in all this continues to be the middle class. They died in 2008. The bull market has moved on for 5 years without them. Honestly, no one really cares. The poor have their problems, the rich never liked them and the corporations have the globe to pillage.

Angel investing and web entrepreneurship will gain further momentum from this deal. As someone who has seen this stuff close up, it’s really possible in the era of the social and mobile web. The original Tumblr angel round was in 2007 at around $3 million. Assuming some dilution that’s a 200 times return on the original investment. A $50,000 angel investment is a cool $10 million. I would not even know how to have placed a stock market option bet for $50k in October 2008 that would have paid out 200 times my money. I can guarantee I would not have placed it and I surely would not have held that bet until today. That’s stuff Warren Buffett does with the money he takes from us for buying his insurance products they have no intention of paying us for with trades guaranteed by Goldman Sachs…

Building publishing platforms is a very sexy category. It is so important that entrepreneurs with vision think they can do it, that angel investors with guts and instinct are willing to invest and that venture capitalists fund and scale it. The platform side is a hard business though. You push off revenue for scale and it just pushes the stress out. Sales is never a sexy part of these companies. But, humans want to publish and share. We want to journal and chronicle. So the Tumblr deal is also a win for us creatives. Zach Verdin who started NewHive (we are investors at SocialLeverage) had this outside the box take on the deal that I agree with.

Time will tell how good an idea this really was for both sides. I love the boldness of it. Obviously Tumblr investors and shareholders are thrilled. They should be.

As for what Yahoo may do with Tumblr to surprise people, Ben Smith founder of Blayze (yes of course I am a biased investor) thinks Yahoo could do as Google did with YouTube and create a partner program. In the end…maybe the creators should/will be paid!

The artists might be the new middle class. Kabam.

4 comments

  1. William Mougayar says:

    100% agreed on who the benefactors were. And that’s what the VC game is all about. I’m happy for all of them, but am puzzled as to how Tumblr was allowed to not get serious about their revenues for so long. With 105 million blogs, 300 million visitors, billions of impressions, etc. – these are killer stats.

    Maybe sometimes a startup can only go so far, then you have to bring the adults to take it further. That’s ok, because they did a pretty damn good job to have taken it that far.

  2. pointsnfigures says:

    Fed has made money cheap. Institutions ran to stocks to stay ahead of predicted coming inflation. Smaller investors are starting businesses, or buying businesses. Accredited investors are turning to angel investing. Everyone is running from investment banks.

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