Is it a good sign that Yahoo, in acquiring Tumblr for $1.1 billion cash, has promised “not to screw it up”?
It’s certainly a sign of humility. A joint press release lays out the terms: “Tumblr will be independently operated as a separate business. David Karp will remain CEO. The product, service and brand will continue to be defined and developed separately with the same Tumblr irreverence, wit and commitment to empower creators.”
Many people are not convinced. But others, like Felix Salmon of Reuters, think the deal is on balance a good idea for both parties. “Tumblr is the perfect platform for Yahoo’s brand advertisers to use if they want to start building up relationships with consumers, rather than just bombarding them with banner ads,” Salmon writes. And from the perspective of Tumblr, the company can now outsource “a lot of the gnarly monetization problems” to Yahoo headquarters.
If Yahoo’s sales team can indeed solve some of Tumblr’s problems, that’s an important indication of whether the deal makes any sense. As we’ve noted, Peter Drucker felt that one of the most important considerations in an acquisition is what the purchaser can do for the company it buys, not vice versa.
But there’s one Drucker rule about mergers that Yahoo and its CEO, Marissa Mayer, may have a tough time honoring: to prepare for the possibly imminent departure of Karp and other senior Yahoo executives by having replacements at the ready.
“It is an elementary fallacy to believe one can ‘buy’ management,” Drucker warned. “The buyer has to be prepared to lose the top incumbents in companies that are bought. Top people are used to being bosses; they don’t want to be ‘division managers.’ If they were owners or part-owners, the merger has made them so wealthy they don’t have to stay if they don’t enjoy it. . . . To recruit new top managers is a gamble that rarely pays off.”
So carpe diem—or carpe Karp.
Do you think Yahoo can realistically hold onto Tumblr’s top management?