Marissa Mayer Just Explained Yahoo's $1.1 ... - Business Insider

At 9 A.M. eastern,?Yahoo hosted a conference call to discuss its $1.1 billion acquisition of Tumblr.

-Tumblr is going to run separately from Yahoo. CEO David Karp will report directly to Mayer. The brands will not co-mingle.?

-Yahoo plans to retain all Tumblr employees.?Yahoo will help it hire more engineers and ad sales people.

-Yahoo believe the deal pushes it over 1 billion users.

-The deal is $1.1 billion, payable almost all in cash. Karp will get some Yahoo stock.

-Yahoo does not expect Tumblr to materially contribute to its revenues until sometime in 2014.

-Mayer says that Tumblr is ahead of Yahoo in mobile.

-Mayer says Yahoo hopes to get search traffic from Tumblr users.

-Yahoo will feature Tumblr blogs on its media properties. She says this should boost Tumblr's traffic and make Yahoo's media properties more attractive to Tumblr's demographic.

-Karp missed the earnings call because he had to host an "all-team" meeting with employees. Mayer is going to start calling Yahoo all-employee meetings all-team meetings, too.

-Karp held a meeting with his senior staff on Friday night, and all of them "signed on" to the deal.

-Mayer isn't worried about all the NSFW content on Tumblr. ?"The width and breadth of content on Tumblr is what's exciting and has allowed it to reach more users."

-Yahoo will bring in-stream ads to the Tumblr dashboard, at some point. It will also help Tumblr bloggers sell ads, if they want to.

9:05 AM | Mayer is on the line

She says the complimentary nature of Tumblr and Yahoo is "uncanny."

She says Tumblr is young and artsy. Yahoo is business-y, sports-interested, and older.

She says Yahoo will benefit from new search traffic.

She's says Tumblr gets search technology, personalization technology, and reach from Yahoo.

She says both companies have "gorgeous" mobile apps.

She calls Karp "inspiring."

9:09 AM | CFO Ken Goldman is on the line

The deal is $1.1 billion, payable all in cash. It's going to close in the second half of this year.

Yahoo's cash was $5.4 billion at the end of Q1. Thanks to a redemption from Alibaba, it exceeded $6 billion "pro forma."

This transaction will not be material this year. It will add traffic and ad inventory.

It will enhance Yahoo revenue in 2014. Operationally, Tumblr will run separately. All current employees will remain. Yahoo will help it hire more engineers and ad sales people.

David will remain CEO and will report to Marissa.

Yahoo will integrate Tumblr content into Yahoo.com.

9:11 AM | Now it's time for questions

9:16 AM | First questions: How'd you become comfortable with $1.1 billion? What will the ads look like? What will search look like?

Goldman says the valuation came out of cash-flow analysis, forward EBITDA analysis, enterprise value in terms of monthly active users and unique users versus other transactions, and precedent transactions like Instagram and Yammer.?

Mayer says that Yahoo released "Yahoo Stream Ads" in May, which take text ads and put them in the news stream on Yahoo.com. She says you can expect more of that on Tumblr. On Tumblr, there is the dashboard, which is like Facebook's News Feed or inbox. Today, Tumblr does some advertising there. Yahoo would like to "introduce a very light ad load" there. ?Yahoo also might work with some bloggers who want ads on their blogs. That would only be done with permission.

Yahoo will possibly provide some Web search on Tumblr.?

Mayer says Tumblr will help grow engagement on Yahoo media brand pages and will also help grow its search business.

9:19 AM | Second questions: What kind of overlap is there with Yahoo's existing userbase? What's Tumblr's mobile like?

Mayer says that there are 700mm users on Yahoo. On Tumblr, they have 300mm. After de-duplication the number is larger than 1 billion.

Mayer says Tumblr has a good mobile story. It's ahead of Yahoo, she says. Users average 7 sessions per day.

9:22 AM | Third questions: When do you think Tumblr will dramatically help Yahoo monetization? Does this signal a change in M&A strategy?

Goldman says revenues will start to materialize "in a major way" in 2014. It will materially contribute to our revenues in 2014 and beyond.?

Mayer says Yahoo's talent aquisitions will continue. She says this larger, more strategic acquisition is an exception. The last time Yahoo did an aquisition of this scale was Overture. She says that buys of that scale become a core part of the strategy.

9:24 AM | Fourth questions: How does Tumblr work with brands? How will Yahoo actually help Tumblr?

Mayer says that brands are a Yahoo strength. She says all the movie studios use Tumblr. She says 8 of the top 10 brands use Tumblr.?

She says Yahoo can help Tumblr host blogs at scale. She says it can send traffic to Tumblr blogs through its own media brands.

9:27 AM | Fifth questions: Will Tumblr enable audience-targeting through interest? How will Yahoo sell Tumblr ads? Through networks or upsell?

Mayer says the ad units will be native and follow the form and function of Tumblr. She says that you can tell interests of users.

9:29 AM | Sixth set of questions: What were the non-cash considerations? What can Tumblr teach Yahoo?

Goldman: There is a small amount of stock related to David Karp, the founder, otherwise its all cash.

Mayer says that Tumblr operates in a fast, nimble way and "there's a lot we can learn from that."

She says their search tech is very visual.?

All-hands meetings are not called that, they are called All-team meetings, and Yahoo is now going to call its that, too.

9:30 AM | Will Yahoo try to move Tumblr users from Tumblr to Yahoo?

Mayer says that the plan is to let Tumblr be Tumblr. Yahoo may power Tumblr search and get some Tumblr users that way. Yahoo will also link more to Tumblr posts from Yahoo media properties, therefore making those properties more relevant to the types of people who like Tumblr.?

9:33 AM | How will Yahoo and Tumblr integrate their brands? Will it be clear that Tumblr is a Yahoo site? Will Tumblr logins change to get more data about its users?

Mayer says Tumblr's brand will grow apart from Yahoo. "We want to let Tumblr be Tumblr," she keeps saying. She cites eBay-Paypal and Google-YouTube as other big aquisitions that worked because the brands stayed independent.

Mayer says she and Karp both want online ads to be as good as the content. She says they both wistfully remember ads that were "aspirational" and made you want to buy a car or see a movie.

9:36 AM | How will the content of Tumblr evolve? Will Flickr integrate into Tumblr?

Mayer says that Tumblr's content will evolve as its users evolve ("creators," she calls them).?

A lot of the posts on Tumblr are graphical, and there are synergies there, but Mayer hasn't looked at specific integrations. Flickr could provide storage for albums or slideshows.

9:36 AM | Karp, by the way, isn't on the call because he's hosting a meeting with his staff right now

9:40 AM | Mayer says Tumblr employees are excited about the deal, and she wants to retain them

Karp told his key management team on Friday night, and the entire management team was excited. They made a point of signing on to the deal.

9:42 AM | Final questions: Tumblr has content that is not "brand safe," (porn), how will Yahoo handle it?

Mayer says "the width and breadth of content on Tumblr is what's exciting and has allowed it to reach more users."

How to address advertiser concerns: We need to have good tools for targeting.

In terms of monetization, Mayer cites the social network movie where they say why would you try to make money when you don't know what you are yet.?

9:43 AM | Closing the call?

Goldman says Yahoo is focusing on growth.?

Mayer thanks you for your time and says you should read the 2.3 billion blog posts that came to Tumblr during the call.

Source: http://www.businessinsider.com/live-marissa-mayer-talks-about-buying-tumblr-for-11-billion-2013-5

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