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It's May 2013. You're Head of M&A Strategy at Yahoo. Marissa Mayer wants to buy Tumblr for $1.1B in cash. Tumblr has 100M users, $13M in 2012 revenue, and a porn problem (estimates: 11% of pageviews).
Your diligence team's number: realistic 3-year revenue from Tumblr ad integration is $50-150M. The strategic argument is "reach the young creators." The cost argument is "we don't have an ad model for a content network we don't moderate."
Marissa wants the board memo in 48 hours.
**Framework: pay for the asset you can monetize, not the asset that excites you.** Tumblr's audience was real, but Yahoo had no ad product that worked on user-generated creative content with major adult-content moderation overhead. $1.1B vs. $50-150M of recoverable revenue is a 90%+ write-down trajectory before you start. The strategic narrative ('reach the young creators') was a vibe, not a thesis with measurable KPIs. KEEP was the actual call.
Yahoo wrote down $712M of the Tumblr investment in 2016. Verizon sold Tumblr to Automattic in 2019 for an undisclosed sum — reported at $3M.