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Verizon to Sell Tumblr to Focus on Premium Original Content

Zacks Equity Research

Verizon Communications Inc. VZ recently inked an agreement to divest the social media blogging site Tumblr for an undisclosed amount. The blogging platform is being sold to San Francisco-based web developer firm Automattic Inc., which is the parent of publishing site WordPress.com, WooCommerce, Jetpack, Simplenote, Longreads, and more.

Although the selling price was not officially revealed, various unconfirmed reports have valued the transaction at about $20 million, which is less than 20% of its original buyout price. In 2013, Tumblr was acquired by Yahoo for $1.1 billion, when it was at the peak of its business. Later, this iconic brand became part of Verizon, when the telecom major acquired Yahoo for $4.8 billion in 2017.

With the gradual emergence of social media sites like Facebook, Inc. FB, Twitter, Inc. TWTR, Reddit and Instagram, Tumblr lost its relevance among netizens, leading to mass exodus of users. The once-dominating blogging platform that boasts more than 475 million independent blogs was up for sale as Verizon Media, of which it was part of, conducted a strategic evaluation to focus on core assets that centered on premium original content.

Tumblr is a strategic fit for Automattic with similar operating businesses in the form of WordPress.com, one of the most popular publishing tools in the Internet, along with Jetpack and Simplenote. Notably, WordPress.com, Automattic’s flagship product, and Tumblr are considered to be the pioneers in blogging platform and share common vision and interests. As part of the deal, Automattic will likely absorb 200 Tumblr employees.

Verizon is increasingly focusing on video streaming content. The company has collaborated with industry-leading web-based video playback services providers — THEO Technologies and IRIS.TV — to deliver new mobile video services with advertising functionality and monetize video content. The AI-powered programming platform will use machine learning techniques to generate unique insights about audience behavior while retaining viewers through personalized touch.

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United States Cellular delivered average positive earnings surprise of 38.3% in the trailing four quarters, beating estimates thrice.

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