One of this summer's biggest business news items is Yahoo's recent $1 billion buyout of Tumblr. In theory, the rationale is sound. Yahoo needs to shed it's image as a doddering relic of the Clinton Administration, and Tumblr is going broke. Still $1 billion is steep, especially considering that 3/4 of that is being accounted for as "goodwill."
The Tumblr brand has value, but... really... $750 million for a few missing vowels?
Sounds like Web 1.0 all over again.
What I mean is that change is provoking older companies to react out of fear.
My favorite example from the Pets.com era was a company called Razorfish. It was founded by Craig Kanarick and Jeff Dachis in 1995, as a web-development services company based in Manhattan. They built solid websites, but so did lots of companies, even then.
The real secret to Razorfish lay in its swaggering corporate culture. Kanarick and Dachis were classic arrogant hipsters. Their condescending manner towards clients was legendary, as was Dachis' mastery of empty buzzwords.
They didn't build websites, they asked you to recontextualize your business.
And in the glory years, there were plenty of clients who wanted to recontextualize. In times of change, overpriced "experts" make hay. Executives who feared and misunderstood the internet could pick up a phone, write a check, and be talked down to by a 26 year-old with blue hair. Nothing could be more reassuring.
Razorfish still exists, but it's a shell of its former self, and the founders moved on over a decade ago.
At its height, it was an overvalued company which profited off fear, rather than what it really brought to the table.
In 2013, Yahoo is behaving like a Razorfish client. The Tumblr deal reflects an old company panicking in order to keep up with competitors. It's a deal in line with the strategy the company has pursed since hiring 38 year-old former Google executive Marissa Mayer as its CEO. To her credit, Mayer has done what she was brought in to do: Make Yahoo.com function more like Google.
But casting yourself as a cheap imitation of a competitor is a tough way to get ahead. Tumblr is a sensible addition to Yahoo's portfolio of services, but paying $1 billion for a company whose value is mostly ephemeral is absurd. Given her experience, Mayer should have known better than to make a classic Web 1.0 mistake.
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