Step away from the shards of glass that litter politics as Republicans have tried to shatter the President’s image. Step over the desolate landscape of unemployment that could end tomorrow with bipartisan effort in Congress. Step up and send the message: end the blame. Fix the country. Jobs now! Housing now! Healthcare now! Let all America stand before the bar of justice. Let’s take the corporate cases first.
The facts: Yahoo bought Tumblr. It paid $1.1 billion. In cash.
Background: Yahoo was supposed to be an internet company on the ropes; its current CEO, the Stanford-educated daughter of a Wisconsin engineer and an art teacher, 37-year-old former Google vice president (employee 20) Marissa Meyer is the company’s fifth CEO in five years! One hedge fund recently dumped 4.7 million shares, zeroing out its investment. But Yahoo’s current market capitalization is $27.78 billion dollars, on a profit-to-earnings (P/E) ratio of under 8, a positive sign for investors: it makes a dollar profit for every eight dollars it brings in.
And just last week, Yahoo won a huge victory in a Mexican court. A judgment against the company for $2.75 billion was overturned—and reduced to $172,500! (Appeals are pending!)
So what does Yahoo get for its $1.1 billion (in cash!)? A company founded in 2007. Six years ago. The website Tech Crunch Base describes the company:
“Tumblr is a re-envisioning of tumblelogging, a subset of blogging that uses quick, mixed-media posts. . . its extreme simplicity will make luring users a far easier task than acquiring users for traditional weblogging. Anytime a user sees something interesting, they can click a quick “Share on Tumblr” bookmarklet that tumbles the snippet. The result is a string of media links and text to pictures and videos that takes very little time and effort . . . There is little to no learning curve involved in using Tumblr. . . Users simply sign up and begin posting in a minute.”
For the record, I tried Tumblr. I did not understand it. I didn’t return. But 300 million discrete/discreet users see Tumblr pages monthly. I say that not only to define individual users but also to signal that Tumblr permits adult content; 11 percent of its user content accounts are labeled “not safe for work” (NSFW), its warning and search firewall for its adult content, which currently drives Tumblr’s highest traffic.
But Marissa Mayer says, “I think the richness and breadth of content available on Tumblr—even though it may not be as brand-safe as what’s on our site—is what’s really exciting.”
How many accounts does Tumblr have? A tech specialist at the site All Things D estimates “the total number of monthly users who will see a Tumblr dashboard is at least a third of the company’s 110 million registered user base, and maybe quite a bit higher: My guess is 30 million to 50 million.”
What is Tumblr’s current revenue? In 2012, $13 million dollars. Yahoo paid $846.15 for each dollar of revenue. Tumblr has not shown a profit. (I have a $20 ebook. At Yahoo’s rate, they would pay me $1692.30 for the right to publish each future copy; not an exact analogy, but the ratio of revenue-to-purchase is true.)
So $1.1 billion will get you $13 million in revenues, lots of dirty pictures and personal musings, hardware, intellectual property, and a promise by the new CEO that she “won’t screw this up!”
Oh. How many employees? 18. A billion-dollar company has 18 employees. Including its Alfred E. Neumann-looking CEO (I’m not kidding!), hood-wearing (stay away from South Florida, dude) 26-year-old CEO who quit high school at 14, at his mother’s suggestion, to be homeschooled.
Some Tumblr users feel betrayed and are angry. One has a petition circulating.
Seriously? You think a petition is going to overturn the sale and stop the founder and the backing venture capitalists from walking away with a cool, no-strings billion dollars in cash, to assuage your emotional boo-boo about the change in ownership of the digital platform that hosts your free account? This is your blow of outrage against the robber barons who provide you and your boys a free site for your porn? You don’t even plan a march in front of Yahoo headquarters? No pies? Not even a Twitter bomb? Keep it up, and David Karp’s mother will visit you and take away your brownies!
Seriously, several issues deserve outrage—and caution. A good staring point is a female CEO buying a site that probably demeans women and treats them as sex objects (An artful rear view photo of Hungarian actress/model Eve Angel kneeling on a chair is entitled “Super-size me”). Mayer seems more concerned about content search safety than the social impact of the attitudes that are enabled by the sites.
Several Tumblr accounts exhibit rape “fantasies” (it shows up in a Tumblr site search), a real non-sequitur, since rape is one of the most physical and psychologically violent crimes imaginable. What does it say that Tumblr users, at least some of them, see rape as a leisure time activity, a publicly hosted, private shared feature of a digital social life?
Will Tumblr advertising take on the character of the back pages of the Village Voice?
Yes, adult digital content is disease-free and can be non-exploitative (at least a case can be made), but in the current atmosphere of misogyny, adult content almost seems the softer side of what the web and real life engage as words and deeds. Remember the Onion’s twitter label for a 9-year-old actress during the Academy Awards? The recent US military report citing 26,000 incidents of sexual assaults last year? The nexus between guns in the home and domestic violence deaths? Or the guy in South Carolina who raped two women while wearing an ankle monitor? Where does Tumblr fit in?
At the core of the deal, though, is the new economy’s blatant indifference to creating jobs. Company valuations no longer depend on value added by labor. It’s been replaced by value added by users. This shift is not a good thing. It’s obscene to shift a billion dollars in capital to a few individuals for a company which isn’t profitable and generates only $13 million in revenue—with producing a single additional job in economy. Its impact on working families and job creation is a representative symbol of seismic changes in the national economic paradigm. Yet it didn’t arise in a single discussion of the deal on the mainstream media. It wasn’t the source of one petition about the deal.
Next case: Apple. B’rer Cook (Tim Cook, Apple CEO) says it’s really Apple in the briar patch. That the company is a victim of unfair and unequal US tax policies as it competes against other companies in other countries that have an advantage.
I am stunned when people pretend the rack rate for corporate taxes is the going rate. And twice stunned when CEOs imply the global differences in tax regulation don’t give them loopholes that they manipulate and take for blatant advantage. And not for shareholder fiduciary. Since Apple, like many companies, hold billions of dollars offshore, and its stock price don’t reflect these “savings,” but mainly is driven by sales, profits, and debt.
Its $170 billion in cash is larger than the national GDP outlook for all economic sectors of all but the world’s top 50 national economies—140 countries have smaller national economies than Apple has cash on hand!
First, Apple has neatly severed its intellectual property and administration and labor from sales and profit and cash. That separation allows Apple to create a supply chain using the Chinese company Foxconn. Foxconn pays near poverty wages even for China, while making extraordinary demands on its workers in inhumane conditions without safeguards, benefits, job security, social norms, due process or safety standards, to produce devices at bare minimum costs.
That separation allows for a product huge mark-up based on marketing, perceived value, and the wealth of consumers in developed economies.
Apple’s separation has one other firewall: Its capital returns are extracted and separated from the taxes of any country, the countries where these funds would improve the quality and opportunities for those whose labor created the product value, those who purchased the product, and for the national legal systems that define and protect the intellectual property that makes the profit possible and prevents its taking and regulates its markets.
Yet the idea grows that business is an amoral enterprise, only responsible to shareholders, only ideal if it focuses on profit, on honest if it “avoids” taxes, only smart if it extracts huge sums of capital while paying the global poverty benchmarks. But it is a very recent concept.
It is being overtaken in Brazil and elsewhere. Still a real push is being waged to make capital the world’s most important commodity, replacing the value of labor.
American workers have lost their sense of history and their passion. For many, blame has replaced organizing; their rage is a robo-reflex, their passion is grounded in hate, not progress. They don’t have a viable role in the new paradigm and have offered no challenge. They don’t seem to get what’s happening. They are still using China as the whipping boy.
But Apple should be challenged as immoral and dumb. Its structural separations can not be sustained. Despite the growing belief that profits are more important than labor and entitled to remain untaxed, it is not an inherent right. Divine entitlement shatters when workers stand up.