Matt Mullenweg's $7.5 Billion Battle: The Shocking Confession About Tumblr and the Legal War Threatening WordPress
Automattic CEO Matt Mullenweg just dropped a bombshell confession at the recent WordCamp Canada 2025 Town Hall: the 2019 acquisition of Tumblr is "probably my biggest failure or missed opportunity."
But this isn't just an exercise in humble reflection, it's the visible crack in a $7.5 billion empire facing a brutal trifecta of problems: a money-pit acquisition, a massive investor confidence crisis, and a fiery, high-stakes legal war.
The confession exposes a CEO under pressure, forced to balance the idealism of the open-source web with the unforgiving realities of Wall Street, cost-control, and a looming courtroom showdown.
The $500 Million Blog Disaster
The core problem of the Tumblr deal is shockingly simple: it costs far more to run than it earns. Automattic CEO Matt Mullenweg revealed the immense, stalled challenge of migrating Tumblr’s staggering half-a-billion blogs onto Automattic’s more efficient WordPress infrastructure — a process that has proven both technically and financially daunting. “I need to switch [Tumblr] over to WordPress … but it’s a big lift. It’s over 500 million blogs … and, as a business, it’s costing so much more to run than it generates in revenue,” he stated candidly. For many observers, this situation underscores not just operational strain but also the leadership failures inherent in underestimating integration complexity and overestimating Tumblr’s turnaround potential.
- The Technical Nightmare: Moving 500 million blogs between completely different technology stacks is one of the largest platform migrations ever attempted. It’s a "technically immense" project that has effectively been shelved, leaving Tumblr as a long-term cost-centre.
- The Cost Conundrum: Automattic's profitable ventures, like WooCommerce (the massive e-commerce plugin) and Jetpack, are currently forced to subsidise Tumblr's financial losses.
This isn't a minor annoyance; it’s a colossal drag on Automattic's bottom line and a major reason for the company's escalating challenges.
Investor Panic: The $7.5 Billion Valuation Slide
Mullenweg’s candor arrives as Automattic faces its biggest challenge yet: investor disappointment.
While Automattic’s valuation peaked near US $7.5 billion following a 2021 funding round, recent disclosures from major institutional investor BlackRock, Inc. suggest a massive crisis of confidence.
- The BlackRock Markdown: BlackRock, a sophisticated institutional investor with access to internal data, has marked down its stake in Automattic by a staggering ~63% since the 2021 high.
- Share Price Shock: The shares BlackRock holds, which were bought for a much higher price, were valued at just US $31.03 each as of March 2025. This deep devaluation is an undeniable sign of investor concern over the company's cost structures, slow growth, and, critically, a lack of clear profitability across its entire portfolio.
This valuation slide is a direct reflection of the market’s scepticism that Automattic can successfully manage its diverse products and transform money-losers like Tumblr into profitable assets. For the CEO, whose personal net worth is estimated around US $400 million, his credibility and his fortune are now intrinsically linked to delivering a convincing turnaround.
Courtroom Drama: The Open-Source War
If financial woes weren't enough, Mullenweg is also wrestling with a fierce legal battle that threatens the fundamental principles of the entire WordPress ecosystem.
The fight with hosting company WP Engine, Inc.—over access to the open-source WordPress infrastructure and alleged misuse of the shared ecosystem—has escalated dramatically.
- The Core Conflict: The dispute revolves around the intersection of open-source philosophy and hard commerce. Automattic accuses competitors like WP Engine of profiting immensely from the free, community-built WordPress platform without "giving back" enough to support its continued development.
- Legal Escalation: Mullenweg addressed the conflict by focusing on "bad actions" rather than "bad actors," calling for new incentive systems to protect the open-source community. However, the conflict is no longer just ideological; it's a full-blown lawsuit that could set a precedent for open-source licensing, contributor goodwill, and the economics of all WordPress hosting companies for years to come. Court rulings have already allowed the majority of WP Engine’s claims, including intentional interference and defamation, to proceed against both Automattic and Mullenweg.
The outcome of this legal risk-zone will profoundly shape whether the open-source movement, which Mullenweg champion's, can survive the pressures of commercial scaling.
The Pivot: What’s Next for Automattic and its CEO?
Mullenweg’s public admission about Tumblr is a signal of a major strategic pivot for Automattic. The focus is shifting away from legacy encumbrances toward the highest-margin, fastest-growing parts of the business.
The CEO's Urgent To-Do List:
- Stop the Bleeding: Show immediate and clear progress on cost-control and a defined path to profitability, especially in its more successful divisions like WooCommerce.
- Solve the Tumblr Problem: The integration remains a monumental pending task. If it can’t be migrated to WordPress to cut costs, the platform's future viability must be honestly reassessed to avoid a "prolonged drag" on the company's financials.
- Defend the Ecosystem: Navigate the toxic WP Engine lawsuit and establish clear, enforceable rules for how large commercial entities interact with the open-source core—a necessity to protect both the community's goodwill and Automattic’s long-term business model.
In short, Matt Mullenweg is facing the toughest test of his career. The Tumblr confession is dramatic, but the real story is the triple threat of financial, legal, and operational failures that must be fixed to save the Automattic empire and restore confidence in one of the tech world’s most influential leaders.
