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Yahoo takes big leap with $1.1B deal for Tumblr


By Michael Liedtke

AP Technology Writer

SAN FRANCISCO (AP) — Yahoo is buying online blogging forum Tumblr for $1.1 billion as CEO Marissa Mayer tries to rejuvenate an Internet pioneer that had fallen behind the times.

The deal announced Monday is Mayer’s boldest move since she left Google 10 months ago to lead Yahoo’s latest comeback attempt. It marks Yahoo’s most expensive acquisition since the Sunnyvale, Calif., company bought online search engine Overture a decade ago for $1.3 billion in cash and stock.

Yahoo is paying mostly cash for Tumblr, dipping into what remains of a $7.6 billion windfall reaped last year from selling about half of its stake in Chinese Internet company Alibaba Holdings Group.

While hailing Tumblr as a fount of creativity that attracts 300 million visitors each month, Mayer told analysts Monday that she is “making a sincere promise to not screw it up.” David Karp, a 26-year-old high school dropout who started Tumblr six years ago, will remain in control of the service in an effort to retain the same “irreverence, wit and commitment to empower creators,” Yahoo said.

Karp’s cut of the deal is about $275 million.

Tumblr, which will remain based in New York, has about 175 employees while Yahoo has 11,300 workers.

The deal is expected to close during the second half of this year.

As popular as Tumblr has become, the service remains unprofitable. That is likely to raise questions about whether Yahoo paid too much in Mayer’s zeal to gain control over a hot service.

Mayer is betting that Tumblr will provide Yahoo with a captivating hook to reel in more traffic and advertisers on smartphones and tablet computers. More than half of Tumblr’s users connect to the service through the mobile app, and engage in an average of seven sessions per day.

Besides offering one of the top mobile apps, Tumblr also runs one of the world’s busiest websites, featuring 75 million daily posts about everything from politics to pets. Advertising has been a missing ingredient so far as Tumblr.

Tumblr could help Yahoo recapture some of its cachet with teens and adults in their early 20s, a demographic that has become tougher for Yahoo to reach in recent years as it fell behind the technological curve and struggled to develop compelling services.


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