Yahoo Considering Deal to Run Facebook Ads in Tumblr

Yahoo! CEO Marissa Mayer Announces Acquisition Of Tumblr For $1.1 Billion
Tumblr founder David Karp and Yahoo CEO Marissa Mayer in May 2013.
Photograph by Mario Tama—Getty Images

Yahoo’s integration of Tumblr, which it acquired in 2013 for $1.1 billion, has not gone as smoothly as either company was presumably hoping it would. After a brief honeymoon, the web giant began trying to generate some revenue from the network but appears to have mostly failed. In a recent securities filing, Yahoo said it has written down the value of Tumblr by 20%, and may have to do so again.

Now, according to a report from The Information, Yahoo is considering a deal with Facebook that would allow the giant social network to sell ads inside Tumblr’s mobile app. Based on comments from anonymous sources within Yahoo (YHOO), the report says Tumblr is selling less than 15% of its available inventory.

It’s not uncommon for large sites to have unsold ad inventory, of course. In addition, most media sites and publishers typically sell a portion of their ads themselves and rely on large-scale “programmatic” or automated advertising networks to handle the rest. But in most cases, ads sold through such automated sales are of lower quality than a site like Yahoo could expect to sell itself, and they bring in less revenue.

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The Information says that a Facebook deal would involve sales through the social network’s Facebook Audience Network, a relatively new offering that allows advertisers who already work with the company to sell ads that also run outside the network on other sites.

Yahoo already has a number of ad-sales deals with outside parties, including a three-year, search-related ad deal that it signed with Google last October. It also has a deal with Microsoft that allows Yahoo to share in the revenue for ads that run on Microsoft properties.

Some Tumblr watchers believe that part of the problem with generating revenue from the network stems from founder David Karp’s dislike of both advertising and other revenue-boosting efforts. But despite his reluctance to talk about such measures in the past, not long after the merger, Karp was openly discussing the potential for high-quality, magazine-style ads on Tumblr and seemed quite enthusiastic about it. For whatever reason, Yahoo and Tumblr have failed to deliver on any of those promises.

In a tacit admission that its advertising strategy failed somewhere along the line, Yahoo recently confirmed that it is unwinding the integration of the site into Yahoo’s existing sales operation, and that Tumblr will have a dedicated sales team of its own again.

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According to a recent report by Business Insider, the merging of those teams caused dissension and led to a number of high-level departures. Advertisers have also said that Yahoo’s ad-sales staff spent most of their time on Yahoo properties and left Tumblr as an after-thought. Many also didn’t appreciate the differences between the main site and the blog network, which has developed a reputation as a quirky community with its own distinct likes and dislikes.

Separating the sales teams isn’t the only move Yahoo has made to try and jump-start advertising revenue at Tumblr: The site has also changed the terms of its ad deals, which used to require that advertisers have a blog on Tumblr before they could run campaigns on the network. That requirement has been removed, Marketing Land reported recently.

The fact that Yahoo may be considering a deal with Facebook (FB) reinforces just what kind of desperate straights the company is in. After more than a year of underwhelming performance, Yahoo finally agreed to consider sales of some of its core assets and has formed a committee to pursue offers. The company had hoped to spin off its Alibaba holdings—worth an estimated $25 billion—into a separate entity, but has had to shelve those plans after failing to get approval from the IRS.

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