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This NYU professor and hedge fund founder calls Tumblr a ‘porn site’ that was the worst acquisition of the decade

(25 Views) July 20, 2016 2:01 am | Published by | No comment

mayer karp

AP Photo/Frank Franklin II

Tumblr founder David Karp with Yahoo CEO Marissa Mayer

In the wake of Yahoo writing down another $ 482 million from Tumblr on Monday, NYU’s marketing professor Scott Galloway had some harsh words for CEO Marissa Mayer and her decision to buy the social media site for $ 1.1 billion.

Monday’s write down was the second impairment charge recorded on Tumblr this year. In February, Yahoo disclosed its first non-cash impairment charge that cost $ 230 million.

In total, Tumblr has essentially lost more than a third of its value during the 3 years under Mayer’s watch.

“Tumblr will likely go down as the worst acquisition in tech of this decade and summarize Mayer’s tenure as CEO,” Galloway told Business Insider.

Galloway lambasted the $ 1.1 billion deal as “overpriced” and compared Tumblr to a “porn site” for its high level of adult site traffic. He narrowed down his thoughts to the following three points:

Yahoo overpaid from the start: Tumblr was reported to have lost $ 25 million on $ 13 million of revenue when Yahoo bought it for $ 1.1 billion in 2013. On top of that, neither Tumblr nor Yahoo has figured out a way to get Tumblr users to allow more ads on their blogs, Galloway argues.

No tech IP value: Sometime you can justify the price if there’s a lot of tech IP involved, but Tumblr doesn’t have much proprietary technology, Galloway says. “None here, just an aggregation of blogs,” he says.

Too much adult site traffic: A quarter of Tumblr’s inbound traffic was estimated to come from adult sites at the time of the acquisition. There’s nothing wrong with that, but it hurts its advertising value, Galloway says. “Yahoo bought a porn site for $ 1.1 billion. P&G or Ford aren’t going to take the risk(s) associated with advertising on Tumblr when they have better/safer options everywhere,” he says.

All in all, Galloway argues the bigger culprit falls on the board members who picked Mayer as CEO in the first place. 

“The level of shareholder destruction here is borderline negligent. The board bares some responsibility as they are fiduciaries for shareholders and should have performed some elementary ‘sanity’ checks that would have produced red flags everywhere,” he said.

Galloway, a marketing professor at NYU’s Stern School of Business, is accustomed to being outspoken as the founder of the activist hedge fund Firebrand Partners. He’s also founded two online businesses and is a frequent media pundit on the tech industry.

But he’s also known for not being shy of speaking his mind. Last year, he stirred controversy when he said Mayer would be out of a job if she weren’t pregnant in a Bloomberg interview. He was also responsible for a viral email in which he told one of his students to “get your s— together.” 

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The post This NYU professor and hedge fund founder calls Tumblr a ‘porn site’ that was the worst acquisition of the decade appeared first on Business Insider.

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