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TikTok beware: Legacy tech owners can spell trouble for trendy sites

It now seems that Microsoft, one of the biggest and oldest legacy tech corporations in the U.S., is the frontrunner to become the owner of TikTok, the hugely popular social media platform drawing in hundreds of millions of users.

We have actually heard this story before: An older, wiser tech company that optimistically takes the young, upstart social media company under its wing through a lucrative deal. But if history is any indication, a big acquisition can be the worst thing a social company can ask for.

Perhaps the most notorious example of Big Tech’s ill-fated dalliance with social media is when Yahoo bought the popular blogging site Tumblr in 2013.

Launched in 2007, Tumblr was mostly populated by teenagers and young people: A little weird, a little wild, a lot of fun for those who were very into the culture, and definitely a defining platform for a lot of people’s high school experiences.

Sound familiar?

At the end of 2010, Tumblr had 3 billion monthly active users.

On May 17, 2013, Yahoo bought the popular social media platform for $1.1 billion.

At the time, Yahoo was already considered a dinosaur in the tech space, so the acquisition had the energy of the Olds butting into the good time that was being had by the youth. Despite publishing their own Tumblr post that famously said, “We promise not to screw it up,” user engagement sank. By 2016, Yahoo had slashed its valuation of Tumblr nearly in half, reflecting lower ad sales and far lower user engagement. A decision to ban sexual content on the site drove even more users away.

Today, Tumblr is rarely included in the list of top-tier social media apps like Twitter, Instagram, TikTok, and Facebook.

Verizon (which purchased Yahoo for $4.5 billion in 2017) sold Tumblr in August 2019 to Automatic for just $3 million, less than your average New York townhouse, or one record-breaking bluefin tuna.

This isn’t the only time Big Tech has screwed up something that people liked and pushed it into the internet dump. Historically, many of these big acquisitions haven’t gone well for those being acquired.

Rising to popularity in the summer of 2012, Vine was a cutesy video social media platform with strong new-kid-on-the-block energy that gained massive popularity very quickly.

Again, sound familiar?

Users would use it to make looping six-second videos of anything and everything around them: Creativity flourished. Stars and inside jokes were born. User engagement rose. Then in October 2012, Twitter bought Vine for $30 million. In 2016, Twitter killed Vine. Why? According to The Verge, its “cultural impact far outstripped its strategic benefits to Twitter.”

After the showdown, Vine’s creator cautioned future founders, telling CNBC: “Don’t sell your company.”

Not every company meets as dramatic of an end as Vine. Some just stagnate. For instance, in May 2011, Microsoft bought Skype for $8.56 billion, its biggest acquisition at the time. While this acquisition wasn’t a death blow to the company, many were left wondering why. At the time, the app only had 124 million monthly active users.

But for a while, engagement grew. A 2016 report said Skype had an estimated 300 million monthly active users worldwide. It was a useful, innovative tool, but not exactly a juggernaut in its space. It never grew to dominate as other trendy apps — like Facebook and Instagram — have.

These days, Skype is just one of many video chatting apps out there, and most messaging apps include some sort of video component. Its nobody’s first choice in a COVID-19 world where Zoom reigns supreme. Even Microsoft itself seemed to ignore the existence of Skype when launched its own business videoconferencing tool in 2017, Microsoft Teams.

But it’s not all bad: According to CNET, Skype reported a massive surge in users due to the pandemic: It now has 200 million monthly active users.

Perhaps the original example of the ill-fated acquisition is Flickr. In 2005, Yahoo bought the photo-sharing site. It was barely a year old at the time, but had managed to gain significant popularity; It was already doubling its user base month-over-month. Yahoo, already considered a legacy company at the time, bought it for somewhere between $22 and $25 million. This deal was hailed as a key moment in the narrative of “Web 2.0.”

Flickr’s popularity then sank from the 19th most-visited website on the internet to 844th, as of August 2020. Verizon (again, which had purchased Yahoo by that point) eventually sold Flickr down the river 13 years later for an undisclosed sum. It is currently owned by SmugMug.

Not all acquisitions are destined to stagnate like Skype, wither and die like Tumblr or Flickr, or straight-up get murdered like Vine: Microsoft also bought LinkedIn for $26.2 billion in 2016 — its largest acquisition to date — and it’s doing fine.

According to one estimate, the site still has around 300 million active monthly users and is growing.

In 2018, Microsoft also bought GitHub for $7.5 billion, a thriving platform for software developers to share and showcase code. The site has 50 million users but has also found a niche as a useful platform specifically for the tech space.

Of course, the epitome of a Big Tech acquisition success story is Facebook: Facebook’s purchase of Instagram in 2012 for $1 billion, and of WhatsApp in 2014 for between $19 billion and $22 billion, have gone notoriously well.

Facebook, however, is not planning to by TikTok. Reportedly, they’re trying to copy it.

So will TikTok’s sale turn it into a juggernaut, or doom it to the digital dustbin? At this point, it’s unclear, and it looks like ByteDance might have no choice but to sell off its U.S. TikTok operations, if President Donald Trump is to be believed.

TikTok may just have to hope that Microsoft — or whichever company decides to buy it — doesn’t mess things up.

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Maya Shwayder
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