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Why Tumblr May Be Trouble for Yahoo

I made no bones about my opinions after Yahoo (YHOO) dropped $1.1 billion in cash for the buyout of Tumbler. The hip, young blogging platform was heralded by some investors as an ambitious effort to reinvent Yahoo under ex-Google (GOOG) staffer and now CEO Marissa Mayer.

stock of the weekMe? I think the move is dumb. And recently I sat down with Alyssa Oursler of InvestorPlace to talk about why.

My list of concerns isn’t new. It includes:

  • Fickle young users suspicious of any advertising and of Yahoo overlords
  • A lack of profits at Tumblr in its current incarnation
  • Overpayment risk, considering no payoff in the near term
  • Struggles with integration to the Yahoo proper
  • Oh yeah, and that whole decline of the portal model and deflationary online display advertising and mobile challenges that Yahoo hasn’t fixed.

But what do I know … Yahoo stock continues to climb, mostly thanks to its Alibaba stake and growth abroad. Tumblr and Yahoo could prove me wrong yet again.

What do you think about the deal? Check out the video and weigh in via the comments section below.

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Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.

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