Tumblr and Yahoo: Everyone's Rich and Everyone Loses

Despite all the excited shouting, there's nothing particularly cheerful about Yahoo's maternal adoption of David Karp. Users are whining, investors are disappointed, pundits are ever-unimpressed, and Karp just gave up the future of his life's work for a bailout.

Yes, it was a billion-dollar bailout. But Tumblr was supposed to never be for sale: "I'm much more enchanted with the notion of something that's employing me in 15 years rather than something that we flip in a year," Karp said in an interview half a decade ago. That's a noble, admirable hope, coming from a young high-school dropout: Money won't matter. Karp's vision for Tumblr—and he loved to talk about his vision—was an artistic utopia, a marketing-free commune of self-expression. Never mind how to keep the lights on.

As time went by, Karp went from saying he wasn't "motivated" by revenue in that '08 interview to even stronger anti-business proclamations: Advertisements on Tumblr would “turn his stomach.” He most recently, in grownup startup-speak, claimed profitability is "not a metric that is particularly important to [Tumblr]."

In other words, making money is for chumps.

This same guy just cleared, by most estimations, a couple hundred million dollars. In what possible world does that make sense? In our new tech economy, where dreams are better than dollars, it makes perfect sense. Yahoo didn't just buy a company, it validated, to the tune of a billion dollars, the notion that bad business is worth pursuing. The entire concept of what makes something a good idea continues to be inverted, warped, and thrown in a gully. This is the idea economy, remember—the industry of fantasy. It doesn't have to "make sense." Money isn't valuable. Success isn't lucrative. Profit is pointless. These are the industry's norms. All you need do to become a billion-dollar business is make people entertained and vaguely interested.

David Karp did just that. Over 100 million entranced humans blog with Tumblr, and not a single one pays for the privilege. They're free to swap reality show GIFs, aspirational shopping photos, and masturbate, with only the faintest whisper of marketing reaching their ears. Karp's insisted for years that the service be a place that spends money and makes virtually none, all in the name of placated teens. It shows on the balance sheet: Estimates peg the company's annual revenue between five and fifteen million, which for one of the most popular websites in the world, is an unsustainable pittance—more in line with a thriving McDonald's franchiser than a mega-popular web property.

But here we are now, in spite of Karp's GIF-auteur dreams, his users' revelry, and his investors' greed—yes, they hoped for a hell of a lot more than a billion dollars. None of them would have prayed for a buy by Yahoo unless they truly needed it. They did need it. Money has a strange way of catching up with you in the real world—especially running out of it. A source with close ties to Tumblr told us that the company only had enough cash to last another six months before going broke, at which point its investors would've floated it only in exchange for serious changes—changes that headstrong Karp would have of course balked at. Changes that ultra-idealistic Zuckerberg accepted, along with adulthood, in order to keep his dream decidedly his, in order to avoid selling to, say, Yahoo.

Karp never grew up. Now Yahoo will own Tumblr, and Karp will be an immensely rich 20-something, because he refused to demonstrate that his company is worth anything, or cooperate with anyone. We've been told time and time again that he's a nightmare to work with, forcing out those he disagrees with, fearful of his coworkers, and too scared to share control of Tumblr with any of them. The company doesn't trust him to speak without supervision. This isn't, then, so much of an acquisition, as an ending—as neat an ending as anyone could hope:

Karp is now a millionaire, and will, eventually, yield to Yahoo as it pushes more ads on his blogchild.

Tumblr's users are cranky for reasons they can't really explain, but they will get used to a new Tumblr that pushes more ads in front of their eyes.

Tumbr's investors will just have to make do with the millions of dollars they're making—instead of some drooling figure ten times that amount—and perhaps not invest in a company that doesn't try to make money next time around. But at least they finally detached themselves from Karp.

Yahoo gets headlines for a couple weeks.

What do the rest of us get? A chance to live in a world where common sense has been thoroughly disrupted. We get a publicly traded company that decides to buy into irresponsibility and financial self-destruction. Real winners don't have to figure out how to make money—they just stall until Yahoo hands it to them.