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Tumblr's sale, first reported late Friday by the WSJ, was about as inevitable a sell out as there could be. Tumblr's board of investors includes Sequoia Capital, Union Square Ventures and Spark Capital, all firms that put money into the company on the promise that within a few years the company would sell itself to someone so there could be a big pay day. After putting in $125 million the pay day ended up being a $1.1 billion deal with Yahoo.
Tumblr's revenue in 2012 totalled a measly $13 million so why would Tumblr be worth $1.1 billion? The answer is that it's not, but that is just the way the game is played. PE's invest in one company, get sold to another. The execs, like members of Congress play along knowing that one day they, too, will get a payout, either through a PE investing in their company, or else a golden parachute when the time comes.
As for Tumblr, the thought is that its move towards "native advertising" will greatly increase is value, with revenue projected to greatly increase. But the idea that readers won't notice the move to what is essentially PR is highly unlikely – but then again, those that are pushing for native advertising don't think much of their readers anyways.