More developments in the Sprint acquisition food chain saga. As expected, Sprint is upping its offer for outstanding Clearwire shares to $3.40 per share, working out to an offer of about $2.5 billion. This comes after originally making an offer of $2.2 billion, based on $2.97 per share.
The new offer values Clearwire at $10.7 billion, but for those investors and bankers who are now thinking they can play a game of chicken against Sprint while the carrier itself is being courted by both Softbank and Dish, think again: “The offer represents Sprint’s best and final offer,” Sprint says flatly.
Sprint was widely expected to up its price for the 50% of shares of Clearwire that it does not already own after shares in Clearwire rose last week to close at $3.20 per share on Friday. Clearwire shareholders were going to meet to vote today and were anticipated to vote against Sprint’s earlier offer, because it was too low. Pre-market today, Clearwire’s shares are at $3.46 and rising.
Sprint, in its statement to the market today, said that its offer is a 14% premium to its previous offer (first made in December 2012), and a 162% premium to the price of Clearwire shares when Softbank made its first formal offer for that company in October 2012, offering to buy it for $20.5 billion.
Sprint itself is embroiled in a game of acquisition tug-of-war, with Japan’s Softbank currently getting outbid by Dish Networks. The news comes a day after Sprint received a special waiver from Softbank so that it could consider Dish’s offer of $25.5 billion for the company.
As we understand it, the two potential buyers are not only arguing over who is willing to give Sprint shareholders more for the carriers’ assets, but which partner would make the best strategic sense. Dish would offer Sprint a very U.S.-focused convergence play with more wireless bandwidth. Softbank would bring better technology and more scale and buying power for its wireless business. The Softbank deal is already fairly advanced and Sprint’s board has so far been appearing to favor that deal, although to answer to shareholders, it’s also considering the Dish offer. The Softbank deal has a $600 million break fee attached if it falls through.
Clearwire is an important part of that picture because of its spectrum in the 2.5GHz band.
“The revised offer demonstrates Sprint’s commitment to closing the Clearwire transaction and improving its competitive position in the U.S. wireless industry. Sprint is uniquely positioned to leverage Clearwire’s 2.5 GHz spectrum assets. Sprint’s Network Vision architecture should allow for better strategic alignment and the full utilization and integration of Clearwire’s complementary 2.5 GHz spectrum assets, while achieving operational efficiencies and improved service for customers as the spectrum and network is migrated to 4G LTE standards.”
Sprint says it has now submitted the bid to Clearwire’s board of directors for formal approval.
Last week we reported that MessageMe, one of the latest messaging apps to hit the smartphone market, had picked up a $10 million Series A round of funding, and today, the company is officially confirming the news, along with some more details on how it’s been doing in the 2.5 months since it launched. It now has 5 million users across both iOS and Android — a five-fold increase on the 1 million that downloaded the app in its first 10 days.
MessageMe aims to carve out a name for itself by offering more ways than the rest of the pack — which includes WhatsApp, Line, KakaoTalk, Viber and Facebook (from which MessageMe gained some notoriety when it was restricted from using Facebook’s social graph API to find friends to use the app) — for users to communicate with each other on its messaging platform. In its case, this is done through notifications via text messages, but also pictures, doodles, video, voice, location and music sent from one user to another. Altogether, usage of these has risen three-fold, to 1,500 per second from 500 65 days ago.
From what we understand, although MessageMe is partly founded by people with extensive gaming experience — Arjun Sethi and Justin Rosenthal both worked together at social games company LOLapps (acquired by 6waves in 2011) — it will be messaging, not games, that will be the revenue driver for the company. Also: no plans to add in advertising, nor to charge for the app. Instead, it will build out premium messaging features such as stickers and money transfers.
The latter is shaping up to be a particularly interesting area, with not only Google swaggering into the ring, but as of yesterday Square as well, alongside a number of other companies like Venmo and established names like PayPal and Western Union already dabbling in features like this.
As we reported last week, and as confirmed by the company today, this latest round was led by John Lilly, the former CEO of Mozilla who is now a partner at Greylock; Lilly now joins the board of LittleInc Labs, makers of MessageMe. Other investors in the round include previous backers True Ventures (where MessageMe was first incubated), First Round Capital, Google Ventures, SVAngel, Resolut.vc, Andreessen Horowitz, and Social+Capital Partnership. The company’s angels also include Airbnb’s Brian Pokorny, Hiten Shah, Eric Wu and TinyCo CEO Suleman Ali.
The company is still in an early and small stage: currently there are only 10 people working for TinyInc Labs.
I caught up with co-founder Sethi to speak a little more about the direction of the company:
About those greyed-out tabs on your app. When are you launching stickers and money?
We’ll start rolling out new features in about a month, although we’re already doing some staged rollouts in beta. Stickers will feature our own content, as well as branded content, from companies that we’ll be working with. Money will be done in partnership with someone. A lot of the new features will come first on Android. Although it’s an app that we launched only last week, it’s easier to add and develop new features on Android.
What about Windows Phone and BlackBerry?
We are taking a close look at all the platforms out there, including web, Windwos and BlackBerry. We’ll see where most of the demand is and what users are asking for to decide what the next step will be for MessageMe.
Talk to me a bit about your thoughts on paid messaging services like WhatsApp or those that rely on adds for revenue.
There is no paid version planned. We’re definitely adamant on keeping it free, simple and fast. We’re also not doing any banner ads or third-party data stuff. We want to make sure that everything you do is private and secure. Even with premium services, you will pay or have option to opt out before you see or use it — that will come into play with how we roll out stickers and accessing content.
WhatsApp (200m+ users) has stolen a march on the messaging apps world with its seemingly global appeal, with Facebook Messenger also doing this to a lesser extent. Meanwhile others have a very regional focus. Where do you sit in that spectrum so far?
Outside of the U.S. most of our growth has been in Europe, and the UK specifically. Most of the usage so far is of a younger demographic.
What message apps do you use?
Besides MessageMe, I use WhatsApp because that’s what’s popular in South Africa [where he hails from] and also BBM. Because I worked in Asia, I also use KakaoTalk for friends in Korea and Line for friends in Japan. I think you’ll always have fragmentation, just as you still do in email [that begs the question of interoperability....]. Then again, I’m not your average user, but I use Line as heavily as MessageMe.
The bookend to Yahoo’s Big News Day — a major refresh of its photo sharing site Flickr — will see the company drop its Flickr Pro pricing tiers as part of a bid to compete better with Facebook/Instagram and the rest of the crowded market in the online photo space. But it is not getting rid of paid tiers altogether: it’s keeping an ad-free tier, called Ad Free, as well as a tier for power users, doublr, respectively priced at $49.99 and $499.99 for a year of use.
The Ad Free service, at $49.99, will do away with the advertising the runs along the right side of the current photo feed — and if today’s discussion of what Yahoo intends to do with ads on Tumblr is any indication, ads that may be appearing soon within your photo streams.
The doublr service (again with those dropped vowels… this had to have played some small role in warming the company to buying Tumblr), priced at $499.99, gives users 1 terabyte of extra space, on top of the 1 terabyte that they will already get free as part of a Yahoo account.
The Pro tiers — priced at $6.95 for three months, $24.95 for 12 months and $44.95 for two years — included unlimited uploads and storage, as well as no ads, and a particularly mean-spirited allowance: those who did upload pictures could download more than just a smaller version of them. (Meaning: those who didn’t pay up wouldn’t get the full copies until they did. Their originals have always been stored by Flickr.)
From what we understand from a person close to Flickr, dropping Pro isn’t going to make much difference to the company because Pro never did very well.
“It has always been a relatively small percentage of the overall user base,” our contact says, adding that while now-distant past CEO Terry Semel had made a big push on premium services, after his departure (and actually during his time) there was “virtually no investment made” in trying to develop or push the Pro tier.
Nevertheless, there are now currently Pro users wondering how exactly Yahoo will be compensating them for the rest of their annual subscriptions. Yahoo notes that as part of the changes it will be removing “pro” badges beside people’s names and people can no longer gift pro subscriptions. Strangely, in a bit of an AOL subscription move, Yahoo says it will continue to offer renewable subscriptions to pro to “Recurring Pro users.”
The Pro tier did have another role to play. Today, CEO Marissa Mayer recounted how the small-image download was what prompted her to rethink Flickr altogether. “When we looked across our services we asked, why are we doing that? That started a thought experiment,” she said. The decision was that Flickr no longer wanted to offer “degraded” images. “We keep your images and you have high resolution images everywhere which is a huge differentiator.”
But in the age of Dropbox, BitTorrent, Mega and more, there are so many places to store pictures online today: will anyone really want to pay such a premium price for that place to be Flickr and Yahoo? In any case, as one person has pointed out already, why users wouldn’t just register for two accounts rather than pay for the extra space?
In the meantime, Flickr users are taking a page from the Tumblr book of user reviews, and laying out their vitriol about the changes over here.
After announcing its deal to acquire Tumblr for $1.1 billion, mostly in cash, Yahoo today started to lay out some of the details for how it intends to make use of the property while trying to stick to its promise “not to screw it up.” Expect more advertising by next year as well as more Tumblr content on Yahoo properties, but more of a cautious step as to how Yahoo will deal with some of Tumblr’s more NSFW content.
Here are some of the more interesting details revealed in the call:
What are Tumblr ads going to look like? Tumblr apparently made only $13 million in revenues last year but CEO David Karp apparently thinks the site is “ready” to make more now that it understands its users, according to Yahoo CEO Marissa Mayer. But she also noted that they will be working from a challenged position, not just because of user resistance but because Karp himself has been “skeptical” about online ads.
In the conference call, Mayer made an early reference to how Tumblr would be able to make good use of Yahoo’s advertising technology, in ways that fit Tumblr’s so-far successful, image-based, quick-blogging, youth-oriented format — what she called “native advertising formats.”
As one example, she pointed to an ad format that Yahoo launched at the end of April, in-stream ads that it runs on its news pages. “On Tumblr we feel we can monetize in ways that are meaningful and add to user experience,” she said. She cited the Tumblr dashboard, or as she called it, the inbox for the blogs you follow. “Today Tumblr already does some ads in that feed. We would like to look at that and understand how to introduce more ads where the ads fit the expectations and follow that form and function.” She also noted that Yahoo may possibly work with bloggers to provide ads that will be run with their permission.
On top of this, expect to see more search ads: there are also plans to integrate Yahoo’s search functionality into the site as well. “We think there is a complelling search story,” said Mayer. “Their body is 50b posts and 5 billion posts of original content so search is already vast. We see an opportunity to integrate with search and provide that. That’s one area we are excited by the acquisition.”
Throughout this, a focus on trying to be Tumblr-centric about whatever Yahoo tries to do there. “It’s not a choice between creativity and monetization,” insisted Mayer.
So when are those ads coming? CFO Ken Goldman said that ad revenues from Tumblr will be “modest” this year — the acquisition is not expected to close until the second of of 2013 — but that they will “ramp up” in 2014 “and beyond.” “We do think those revenues will start monetizing materially [and] will contribute to revevenues in 2014 and beyond,” he said on the call, “not just standalone for Tumblr but also incrementally, helping Yahoo to growth.”
Porn? The NSFW, notorious part of Tumblr was never referred to by name, but an analyst did ask about what Yahoo, while courting mainstream brands to market to that attractive Tumblr audience, would do about content that is not “brand safe”. “The richness and breadth of the content… is what makes it more exciting,” enthused Mayer. “In terms of addressing concerns around brand safety we need to have good tools for retargeting.” [Another acquisition, methinks? In any case, no outright announcement that Yahoo intends to get rid of all those sites that Tumblr has more or less accepted into the fold.]
Mayer continued: “Tumblr is now at the point that they do know what it is and what makes sense to monetize in way that is tasteful.” She also mentioned due diligence but also something else, effectively implying that Yahoo will figure out a way of getting around the NSFW content and serving ads where they want them to go, because that’s what the advertisers want: “There are a lot of marketers eager to participate in Tumblr platform and the demographics,” she said.
What does the $1.1 billion “substantially in cash” mean? Goldman noted that it’s effectively an all-cash deal, save for some shares in Yahoo for David Karp. He also noted that Yahoo still has “ample cash” for more acquisitions and investments, to the tune of about $6.2 billion. These will not likely be along the lines of Tumblr in terms of size. “This is an exceptional company and team,” she said of Tumblr. At 300 million monthly unique users, Yahoo is paying about $3.67 per user for the acquisition.
Complementary properties. Mayer made a lot of the fact that Tumblr and Yahoo actually fit “really beautifully together,” like South America and Africa, in her words. In addition to Yahoo skewing older and Tumblr skewing younger, “We are strong on sports, finance and news; Tumblr’s strong on architeture, travel and fashion. We need great tools for content publishing and creation. They have them. Tumblr prides itself as a home for brands. Yahoo is all about brands.”
Tumblr comes to Yahoo. While a lot of the expectation so far has been about how Yahoo may mess up or spiff up or monetize up Tumblr, another theme that emerged during the call was the idea of Tumblr content going out to Yahoo properties — a way of attracting users to Yahoo that may not have gone there before.
“Our strategy is to let Tumblr be Tumblr,” said Mayer. “There are some who will always prefer Tumblr and will never come to Yahoo. [But] as we pull Tumblr content into our news feed and media experiences it will cause them to become that much more interesting and richer and will cause more to come to Yahoo. I imagine engagement will improve as we incorporate that content.”
Flickr. There is a separate news conference today that will likely concentrate on updates to Flickr, but today Mayer appeared to douse out speculation that it will be a move to begin integrating its online photo site with Tumblr in any way: “In terms of how the content of Tumblr evolves it depends on the creators,” Mayer said in answer to a question of what this acquisition will mean for Flickr. “It’s something that we will turn our attention to in the future. It will provide great storage, but we will see how those two cousins should relate to each other.
Image: Tumblr (where else)
Yahoo has now officially confirmed that it is buying blogging platform Tumblr for $1.1 billion mostly in cash, after reports on an impending deal first surfaced last week. It says it will keep it as an independent company, with founder David Karp at the helm as 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,” it writes.
The deal will close in the second half of this year.
With a lot of negative comments coming in from Tumblr users in lead-up to the deal, and some competitors claiming that they’re witnessing a kind of exodus from Tumblr as a result, Karp has also weighed in with his own announcement about the deal, emphasizing the same independence line: “We’re not turning purple,” he wrote:
“We’re not turning purple. Our headquarters isn’t moving. Our team isn’t changing. Our roadmap isn’t changing. And our mission – to empower creators to make their best work and get it in front of the audience they deserve – certainly isn’t changing.”
Karp also points out that Tumblr, joining up with the “original Internet company,” will be getting more resources to create the “ultimate creative canvas.” Some users have complained about certain features around the site, such as how video works, so the implication here is that areas like this will be addressed faster from now on, but — again — in a way that “doesn’t compromise the community and product we love.”
To get into the spirit of things, Marissa Mayer has fired up her very own Tumblr account and has posted on the news herself, complete with her own GIF to commemorate the deal (and, yes, also respond to the negativity):
Although both Karp and Mayer are pushing hard on the “we will not screw this up” line, there are of course business reasons behind it.
The deal, as many have pointed out, will give Yahoo not just access to more younger users (Tumblr is strongest in the 18-24 age bracket), but a fast-growing number of consumers who are in general very engaged online. Yahoo notes that Tumblr currently has 300 million monthly unique visitors and is growing by 120,000 signups every day, “one of the fastest-growing media networks in the world” with 900 posts per second and 24 billion minutes spent on site each month. There is also a strong mobile story that fits with Yahoo’s new emphasis on that platform: more than half of Tumblr’s mobile users using the mobile app on an average of 7 sessions per day.
Yahoo says it expects Tumblr to expand Yahoo!’s audience by 50% to more than a billion monthly visitors, and to grow traffic by approximately 20%.
That’s presuming there will be advertising against all of that content and all of those users. While Yahoo and Tumblr say that we won’t be seeing the birth of Yahooblr here, it’s also careful to note that advertising and Yahoo’s other monetizing services will most certainly be finding a place at Tumblr.
Tumblr, it appears, will be using Yahoo’s “personalization technology” and search infrastructure in its services to help users find content that fits their interests better. This is directly connected to advertising: “In turn, Tumblr brings 50 billion blog posts (and 75 million more arriving each day) to Yahoo!’s media network and search experiences,” Yahoo writes. Still, these apparently won’t be standard Yahoo display ads like the ones we see everywhere else: “The two companies will also work together to create advertising opportunities that are seamless and enhance the user experience.”
Tumblr has been working on services like this for some time, for example with its Spotlight highlighting Tumblrs from brands. This last year helped the company make some $13 million in revenues — not much by Yahoo standards. It will be interesting to see whether Yahoo will be able to raise that figure without lowering the others around usage that attracted it to Tumblr in the first place.
The companies are holding a conference call at 9am Eastern time; we’ll be listening in and updating from that.