Verizon dumped the blogging site Tumblr this week for a massive loss, an admission by the wireless company that its ambitious media expansion plans haven’t yet met expectations.
The sale to WordPress.com’s parent Automattic was reported to be for $3 million, according to Axios, a paltry sum compared to the $1.1 billion Yahoo paid in 2013. Yahoo Chief Executive Marissa Mayer had promised not to “screw up” Tumblr, which was her largest acquisition. Alas, the deal didn’t work out as planned.
After Tumblr failed to generate “meaningful revenue” for Yahoo, the portal wrote down the site’s value by $230 million in 2016. Verizon acquired Tumblr along with the rest of Yahoo for $4.48 billion in 2017. The wireless company also bought AOL for $4.4 billion in 2015. Verizon’s media properties include AOL, the Huffington Post and Yahoo Finance.
Verizon CEO Lowell McAdam, who championed the company’s move into media, stepped down last year and was replaced by Hans Vestberg, who isn’t as enamored with the business. Earlier this year, Verizon Media Group cut 7% of its staff.
“The direction of any company typically changes when a new CEO enters the scene,” Jeff Kagan, an independent telecommunications analyst, told Karma in an email. “Sometimes the shift is gradual. With Verizon, the shift seems to be massive.”
- According to the Wall Street Journal, Tumblr users were alienated by Verizon’s decision last year to ban adult content from the site.
- During the second quarter, Verizon Media Group, formerly called Oath, generated $1.8 billion in revenue, down 2.9% from a year earlier.
- According to Reuters, Verizon recently ended its search for buyers for Yahoo Finance, the most-visited site in the business and finance category. Verizon declined to comment to Reuters.
- Verizon is trying to broaden the reach of Huffington Post and Yahoo with subscription products. Yahoo Finance, for instance, recently began selling a $50-per-month service with advanced charting, access to research notes and investment suggestions.
- Verizon took a $4.5 billion writedown on its media business last year, which is struggling to sell online ads in a market dominated by Facebook and Google.
- Karma Takeaway: Wall Street will ratchet up the pressure on Verizon to trim its media holdings since the wireless company’s stock has barely moved this year while rival AT&T, which has also aggressively moved into media, has posted a gain of more than 20%.