That's basically poor for most Internet companies at Tumblr's level

Aug 9, 2013 08:00 GMT  ·  By

Tumblr may have been bought by Yahoo for $1.1 billion (€822 million), but the company was extremely poor before the acquisition, a SEC filing shows.

Ever since the popular blogging platform got sold to Yahoo there have been talks about the reasons behind the deal. While Yahoo obviously wants to attract a much younger audience, everyone reasoned that the only motive David Karp would have to sell his project was money.

And it’s not about how much money Karp would win through such a deal, but rather the lack of cash to keep the company going for much longer, especially since advertising on the platform was limited.

And the reason is now obvious after a filing with the Security and Exchange Commission became public. Tumblr had a bit more than $16 million (€12 million) in the bank when Yahoo bought it.

Not even the “customer contracts and related relationships” were worth the full $1.1 billion Yahoo paid for it, according to the filing, but rather a mere $200 million.

The Internet giant admits that about three quarters of the acquisition price was “good will,” which means this is how valuable Yahoo thinks Tumblr can be and how it hopes to prosper following the acquisition.

Karp himself got about $250 million (€187 million) out of the deal for being the company’s founder and CEO and will get an extra $110 million (€82 million) if he stays on to lead Tumblr for another four year.

Most of the sum comes in stock units, while some cash is also included.

Following the acquisition, the number of blogs on Tumblr increased considerably, although another report indicates that the site’s web traffic slumped considerably during the same time period.

If Tumblr continues on the path set by Karp so far, many of its users will continue to stay on, despite the general outcry generated by news of the acquisition.