Yahoo Incorporated will buy blogging service Tumblr for $1.1bn cash, giving the Internet pioneer a much-needed social media platform to reach a younger generation of users and breathe new life into its ailing brand.
The deal, announced on Monday, is a bold bet by Yahoo Chief Executive, Marissa Mayer, to revitalise the company by co-opting a Web property with strong visitor traffic but little revenue.
The combination of Yahoo and Tumblr creates an online powerhouse with roughly one billion users, which will draw in more advertisers and help Yahoo keep visitors on its properties for longer periods of time, Mayer told Reuters in an interview.
“Tumblr in terms of users and traffic is an immediate growth story for us,” she said.
Analysts say Yahoo appeared to be overpaying for a business that has never posted a profit, makes a fraction of Yahoo’s sales, and may not contribute significantly to revenue for years. But the company, rebuffed by the French government when it tried to pay $1bn for video site Dailymotion earlier this year, had to do something to plug a hole in its social media efforts.
Yahoo made clear it was sensitive to concerns that it might damage Tumblr by making it less irreverent or more corporate.
“Per the agreement and our promise not to screw it up, Tumblr will be independently operated as a separate business,” Yahoo said in a statement.
The deal will make Tumblr founder and CEO David Karp, 26, a multimillionaire.
Tumblr is one of the Web’s most popular hubs of so-called user-generated content, drawing young people who use the platform to post pictures and text. It has more than 100 million blogs in its network, ranging from “White Men Wearing Google Glass” – a collection of photos poking fun at the early adopters of the wearable computing devices — to housing-focused “The Worst Room.”