Yahoo To Buy Tumblr For $1.1 Billion

Marissa-Mayer-AA2The Yahoo board has agreed to acquire popular blogging site Tumblr for $1.1 billion in cash, according to reports Sunday. The deal, first reported by tech blog AllThingsD, is expected to be announced as soon as Monday.

Neither representatives from Yahoo or New York-based Tumblr responded immediately to media inquiries on Sunday.

The acquisition would mark Yahoo’s most ambitious move yet to revitalize the aging Web portal under CEO Marissa Mayer, who joined the company last July to lead its latest turnaround effort. Buying Tumblr would immediately give Yahoo a credible presence in social media through its audience of 117 million unique users worldwide.

The six-year-old startup has grown quickly by making it easy for people to set up their own blogs and post content while following others on the site through feed updates. To date, the site boasts more than 108 million blogs and 50.8 billion posts. It had U.S. traffic of 37 million in April, roughly on par with the likes of Twitter and LinkedIn.

What's more, Tumblr's younger-skewing audience could help Yahoo gain renewed relevance with Millennials and fresh interest from advertisers. So far, Tumblr has taken a go-slow approach to monetizing the site to avoid alienating users. It introduced advertising only last year, selling ads near users' “dashboards” and in the Spotlight section.

Last month, it extended advertising to its iOS and Android apps as its seeks to capitalize on rapidly growing mobile use. Tumblr had 12 million unique users on smartphones -- up from four million a year ago, according to comScore. The company’s mobile growth dovetails with Mayer's focus on making Yahoo a mobile-first company as a growing share of its own traffic shifts to handheld devices.

During the company’s first-quarter conference call, Mayer noted that the number of Yahoo mobile users worldwide had swelled to 300 million from 200 million last year. Under her guidance, the company has also made a series of smaller mobile acquisitions including startups Stamped and Summly.

Whether the purchase of Tumblr will prove a turning point in Yahoo’s resurgence is hardly assured, however. The company has a history of pursuing high-profile deals that didn't deliver long-term payoffs. That includes its multi-billion dollar acquisitions of GeoCities and Broadcast.com in the dot-com era, and Flickr in more recent years.

Tumblr founder and CEO David Karp will maintain a high level of control under the Yahoo deal, similar to Instagram CEO Kevin Systrom at Facebook, according to AllThingsD. Operating the blogging site as a freestanding subsidiary as Facebook has done with Instagram could help keep Tumblr users from fleeing Yahoo's embrace.

With its large sales force and advertising infrastructure, Yahoo could also ramp up advertising on the service. But it may be reluctant to move too fast and risk turning off the Tumblr users Karp has been gradually acclimating to advertising. He has said in recent media reports that the company had $13 million in revenue last year.

Tumblr -- which has 175 employees -- has raised $125 million in venture funding to date from investors including Union Square Ventures and Spark Capital, giving it a reported valuation of $800 million. 

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1 comment about "Yahoo To Buy Tumblr For $1.1 Billion ".
  1. Bill Hildebolt from Expo Communications , May 20, 2013 at 9:46 a.m.
    Flickr didn't pay off at a $35mil pricetag? Hmmm.