Yahoo to acquire Tumblr for $1.1 billion cash

The Yahoo logo is shown at the company's headquarters in Sunnyvale, California April 16, 2013. REUTERS/Robert Galbraith
Yahoo CEO Marissa Mayer announced the company’s purchase through a Tumblr account. Credit: Reuters

Yahoo Inc. said it is acquiring blogging service Tumblr for $1.1 billion cash, a bold bet by Chief Executive Marissa Mayer to revitalize the struggling Internet pioneer by co-opting a Web property with strong visitor traffic but little revenue.

The deal, which will use about a fifth of Yahoo’s $5.4 billion in cash and marketable securities, is the largest by far since Mayer took the reins in July seeking to reverse a years-long decline in Yahoo’s business and Web traffic.

“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 Monday.

Tumblr is one of the Web’s most popular hubs of user-generated content. The deal will provide Yahoo with a much-needed platform in social media to reach a younger generation of users less tied to Yahoo’s traditional Web portal and email services.

Analysts, contacted after the deal was reported on Sunday by the online publication All Things D, said Yahoo was paying a hefty premium. Media reports have pegged Tumblr’s 2012 revenue at $13 million. The privately held company, based in Manhattan, does not disclose its financial results.

“Even if revenue was $100 million, it means Yahoo paid 10 times revenue,” said BGC Financial analyst Colin Gillis. “Ten times is what you pay to date the belle of the ball. It’s on the outer bands of M&A.”

Yahoo could quickly boost Tumblr’s revenue by combining the website with its own sales force, said Pivotal Research Group analyst Brian Wieser. But loading Tumblr up with banner ads risks alienating its users and probably wouldn’t provide a significant lift to Yahoo’s overall revenue, he said.

“It’s not clear that this deal will be favorable from a return-on-capital perspective,” Wieser said. “One billion (dollars) for one company is a big bet.”

Shares of Yahoo fell 1.4 percent in premarket trade. They closed on Friday at $26.52.

Yahoo remains one of the Web’s most popular destinations, with hundreds of millions of monthly users, but the company has seen its revenue shrink in recent years as consumers and advertisers favor rivals such as Google and Facebook.

Yahoo said the acquisition is expected to increase its audience by 50 percent to more than a billion monthly visitors.

David Karp, who founded Tumblr in 2007, will remain CEO.



News
Entertainment
Sports
Lifestyle
Local

NYPD: Suspect dead after two U.S. Marshals, cop…

A suspected sex offender died during a shootout inside a West Village smoke shop that left two U.S. Marshals and an NYPD detective wounded, officials said.

National

OkCupid admits to Facebook-style experimenting on customers

By Sarah McBrideSAN FRANCISCO (Reuters) - OkCupid, a top U.S. matchmaking website, intentionally mismatched users to test its technology, the IAC/InterActive Corp service said on…

Local

MTA fares still increasing 4 percent in newly…

The agency said the 4 percent increases, previously announced in December, will remain steady even as the MTA deals with increasing labor costs.

Local

De Blasio, Bratton defend city's efforts after Eric…

Mayor Bill de Blasio justified the city's response to the death of Eric Garner, a Staten Island man who died while in police custody earlier this month.

Movies

Interview: Brendan Gleeson on the way 'Calvary' depicts…

Brendan Gleeson talks about how his new film "Calvary" began over drinks and how his character here is the opposite of the lead in "The Guard."

Movies

'Get on Up' producer Mick Jagger on the…

Mick Jagger, a producer on the James Brown biopic "Get on Up," talks about the time had to tell the singer some bad news and his favorite JB record.

Television

'Glee' star Lea Michele to appear on 'Sons…

"Glee" star Lea Michele has been confirmed as a guest star in the final season of "Sons of Anarchy."

Television

TV watch list, Monday, July 28: 'The Bachelorette'…

See Andi Dorfman make her big choice on tonight's 'Bachelorette' finale.

NFL

Computer to Jets: Start Michael Vick over Geno…

Jets general manager John Idzik says the choice of who starts between second-year quarterback Geno Smith and veteran Michael Vick will be a “Jets decision.”

MLB

Yankees looking to trade for Josh Willingham: Report

CBS Sports’ Jon Heyman reported Sunday the Yankees are interested in Twins outfielder Josh Willingham.

MLB

Joe Torre: I'm in Hall of Fame because…

Joe Torre spent 18 years putting together a near Hall of Fame career as a player. But it was the 12 years he spent as…

MLB

Yankees GM Brian Cashman breaks down art of…

The action frequently accelerates as the non-waiver trade deadline approaches, as it will on Thursday.

Education

Babson College tops list of best colleges for…

Money magazine has just released its inaugural list of "The Best Colleges for Your Money" -- and the answers have surprised many. Babson College, which…

Education

NYC teens learn how to develop apps during…

Through a program sponsored by CampInteractive, the high schoolers designed their own community-focused apps.

Tech

The Ministry of Silly Walks app is both…

Monty Python have dug into their back catalogue for cash-ins once more, but with the Ministry of Silly Walks app, they've made something that's fun too.

Food

Zagat releases '30 Under 30' list

Zagat releases a list of the people changing the food and drink industry across the country.