Tumblr owes three-quarters of its value to how cool it is.
The blogging startup sold to Yahoo in May for nearly a billion dollars, a staggering price even by the standards of the overheated American tech market. In a regulatory filing out today, Yahoo detailed how it arrived at that $990 million valuation. Most of it, $751 million, was attributed to goodwill—or, roughly speaking, the value of the company’s reputation.
Goodwill is how accountants make up for the gap between a company’s real worth and what it can fetch on the open market. Valuing a fast-growing startup like Tumblr, which had little revenue when it was acquired, can be particularly difficult without a hefty helping of goodwill. The value of Tumblr’s tangible and intangible assets amounted to just $353 million, according to Yahoo’s accounting. Tumblr also had $114 million in liabilities.
In the filing, Yahoo explains Tumblr’s goodwill this way: “This acquisition is expected to bring a significant community of users to the Yahoo network by deploying Yahoo’s personalization technology and search infrastructure to deliver relevant content to the Tumblr user base.” That doesn’t exactly scream cool, but to each his own.
Today’s filing also revealed that Tumblr founder David Karp stands to make $81 million in cash and stock if he stays at Yahoo for four years. That’s independent of his salary at Yahoo, which isn’t known, and the $250 million he is said to have made selling his stake in Tumblr.
Correction (7:56 p.m. ET): David Karp’s retention package is worth $81 million. An earlier version of this article misstated the figure at $110 million.