Random Tumblr thoughts

The Tumblr user metrics were spectacular with:

• 108mm blogs and 50+ billion posts
• 76mm posts were created EVERY day
• In April of 2013, just before the acquisition, the website had more than 13B page views. 

The company was launched in 2006, so the exit in 2013, fits the timeline seen between start-up and exit. Of course, great success, or quick failure accelerates the exit timeframes.

New York has now seen two great exits in the last 12 months, Buddy Media and now Tumblr, Once 'lucky' and twice a trend. Capital flows to where it's 'appreciated'; NY has now generated the type of spectacular returns that investors will accelerate their moves here.

Kudos to Union Square and Spark. They first invested in an untried CEO, in an under performing technology City, and in an arena "social", which was not yet taken seriously. Viva the product guys and the investors who had a great deal of patience. As Chris Douvous said, moves like this are either career threatening, or career making.

Marissa Mayer is changing the culture at Yahoo. In the past year, she has now made 10 acquisitions and is bringing back an entrepreneurial spark to the engineering and product teams for this once proud franchise.
Tumblr absolutely fits her first acquisition screen, she wants Yahoo to be a part of your everyday online routine. You may scratch your head on the price, but this transaction is dead on strategy.

Carol Bartz, was the right CEO for a time at Yahoo, as she cleaned up the run away anarchy, held people accountable, and had a no nonsense approach. Though she was unable to, or was not given the time to articulate and execute on a grow the company plan, she did set a foundation for Marissa Mayer to do her thing.

For the success of the transaction, it's dangerous for the buyer and seller to highlight that Tumblr will be autonomous. Sure they should be protected from all the people who want to 'help', but it is essential that a MERGED singular entity put their best foot forward. Tumblr, now as part of a public company is no longer a science project, there's an obligation to earn revenues and profits. This can best be achieved with some help from the other parts of the company which are collectively earning quarterly revenues in excess of $1B.

New York, New York, it's a Hell of a town

Over the past 5 years, I have been continually testing my thesis that the best way to make money investing in technology companies is to invest in companies which have the potential to be market leaders; in a market worth caring about. Around ten years ago the folk at Morgan Stanley (at least that's where I recall they were from) did a great piece of research showing that the overwhelming majority of any market segment's capitalization rests with a scant few, mostly public firms. The message was compelling, if you are not in the top three market share spots, an investors risk/reward ratio goes so sky high that you would be better off playing the lottery (the risk increases, while the reward simultaneously decreases). 

Though you may make the right call to invest early in a burgeoning market, unless you execute towards a leadership position, it's going to be a problematic investment. Choosing the right market is a necessary, though not sufficient ingredient for success. It's essential that the management team, supported by investors with sufficient capital and drive have a common objective. 

To paint with a broad brush (exceptions abound) I think it's fair to say that there is a distinct difference between East coast and West coast investors and management teams. I believe that West coast investors and teams have been far more market share driven than their right coast sibling and believe that the preponderance of technology  market share leaders being in the Valley is a direct result of this culture.

The Boston to NY corridor does have its share of companies which are showing great signs of success. Some look really great and have the potential to be market leaders, such as Tumblr, Payoneer, Etsy or 10Gen. But it's also fair to say that since the heyday of Doubleclick and AOL, we may not have a critical mass of companies which are hell bent on being market leaders, in markets which matter.

Web publishing turbulence and opportunity

I read an interesting piece in ReadWriteWeb regarding why Web Publishing is changing. It makes some great points about the lowering of the barriers to post, explaining the rise of discovery, and the importance of an easy viewing experience (e.g. the continuous scroll of Pinterest or Tumblr). All fueling an explosion of new sites and probably paving the way for e-commerce to really come into its own.

Here's some additional perspectives:

• The Web is drowning with content, photos, videos and text. Search is breaking under its weight and that drove the rise of Discovery. Discovery, via tags or categories, provides a level of organization that straddles chaos and the hyper-organization which is Search (of course, being gamed via SEO)

• Such organization is best accomplished in a casual way, where it's near painless for people to post to, or view their streams, in a multimedia way

• In this paradigm, vertical market players should have an advantage over horizontal platforms, only if they want to concentrate on content quality (and they should want to change this as the content is the ultimate driver of viewers....especially repeat visitors). Quality begets quality, having schlock devalues the brand.

• At its heart, many sites are vertical market custom publishing systems which become content platforms that address specific markets. Today, much of the content is community curated. This will be complemented via algorithms which understand what is of interest to whom (e.g. personalization via behavior and the social graph).

• The 'free lunch' of ripping off content from artists will eventually come to an end. Tumblr, Pinterest, et al, will have to reach an accommodation with copyright holders (often independent photographers or videographers).