Yahoo yesterday announced that it would acquire blogging platform Tumblr for US$1.1 billion, saying the two companies “share a vision to make the Internet the ultimate creative canvas.”
The two firms confirmed weekend reports of the tie-up, in a deal which helps the struggling Internet pioneer connect with Tumblr’s youthful users.
The companies said the deal is worth US$1.1 billion, “substantially all of which is payable in cash.”
Yahoo chief executive Marissa Mayer said the fast-growing Tumblr would operate independently, but that the groups would “work together to create advertising opportunities that are seamless and enhance user experience.”
“We promise not to screw it up,” Mayer said in a blog post on Tumblr, as Yahoo moved its official company blog to the new platform.
“Tumblr is incredibly special and has a great thing going. We will operate Tumblr independently. David Karp will remain CEO,” she wrote.
“The product roadmap, their team, their wit and irreverence will all remain the same as will their mission to empower creators to make their best work and get it in front of the audience they deserve. Yahoo will help Tumblr get even better, faster,” Mayer added.
In a statement to “the Tumblr community,” Karp said: “Our team isn’t changing. Our roadmap isn’t changing. And our mission — to empower creators to make their best work and get it in front of the audience they deserve — certainly isn’t changing. But we’re elated to have the support of Yahoo! and their team who share our dream to make the Internet the ultimate creative canvas.”
The deal is expected to close in the second half of the year. Yahoo has been looking at a range of possible acquisitions since Mayer took the helm last year and vowed to revive the company, which has faded in the face of competition from Google.
Tumblr could be key to Yahoo’s strategy because of its popularity with younger Internet users. A survey this year conducted by the online data group Survata found Tumblr more popular than Facebook among those aged 13 to 25.
While Tumblr generates very little cash, bringing it in the Yahoo family could offer the potential for new advertising and other revenue sources.
Roger Kay at Endpoint Technologies said the deal “brings a social element that Yahoo! is missing and a set of new users.”
However, Kay added that “paying [US]$1.1 billion for a company with [US]$13 million in revenue seems a little nuts to me ... Those numbers aren’t even earnings, which are surely negative. So, even if Tumblr survives intact, Yahoo is unlikely to get its [US]$1.1 billion back over any interval that falls within a human lifetime.”
Founded in 2007, Tumblr says it has more than 108 million blogs, 50 billion postings in 12 languages and 175 employees.