Yahoo Inc. (NASDAQ:YHOO) has been struggling with user growth and declining ad sales for several years, but at least one part of the company is growing: Tumblr. Registered users of the social image-sharing network have grown 46.7 percent to 13 million in 2013, according to eMarketer.
It projects that Tumblr user growth will decline to 25 percent in 2014, to over 17 million users, more than half of whom are aged 18 to 34.
Yahoo bought Tumblr for $1.1 billion last year but does not break out its performance. Since then it has integrated the platform throughout Yahoo and is using it to spearhead its in-stream ad strategy. But none of that is yet paying dividends on Yahoo's bottom line.
Ad revenues for the company declined 7 percent from April to May, and eMarketer says its share will fall from 9.2 to 5.8 percent of the total US ad market this year. By comparison, eMarketer projects that Twitter Inc. (NYSE:TWTR) will rise to 3.5 percent of the market in 2014.
Facebook Inc. (NASDAQ:FB), for comparison, will see its share of display ads rise to 21.5 percent, the company says. So why is Yahoo lagging so far behind? According to eMarketer, the company’s Tumblr acquisition is just one part of the puzzle.
“Yahoo has pointed to, not only Tumblr, but a lot of other mobile properties as potential avenues for growth. We wanted to take a look at what that potential might be, considering Yahoo hasn’t shared a lot of information on it so far,” said eMarketer’s Dan Marcek.
Meanwhile, Yahoo still has yet to show any improvement in its ad revenues. eMarketer also projects slowing user growth for Tumblr, which tops out at 60 million in 2018. However, it defends other aspects to the network, known for offering and tracking users’ “reblogging” of images.
“Tumblr is a good platform with a highly engaged user base, which is going to be very important for Yahoo going forward, even if it’s smaller than Instagram or Twitter in terms of regular users,” Marcek said. “Our user figures track people who log in to the platform at least once per month throughout the entire year, so it doesn’t reflect the number of tumblr blogs, for example.”
Not only does the average Tumblr user have multiple blogs (Marcek said he had five, for example) but it allows anyone on a computer to view its content – and ads as well. Most social networks require logging in to view or interact with anything.
“That’s why [Tumblr blogs] have a much wider reach than you would have from other social networks,” Marcek said. Tumblr may have a wider potential net than other social networks for ad views, but so far, Yahoo has been unable to capitalize on it.