Yahoo confirms $1.1 billion deal to buy Tumblr blogging service

San Jose Mercury NewsMay 21, 2013 

Yahoo Tumblr Acquisition

About $275 million will go to Tumblr founder David Karp, 26, who dropped out of high school to concentrate on computer programming and started Tumblr six years ago.CHARLES SYKES/Invision for Advertising Week

CHARLES SYKES — AP

Yahoo Inc. confirmed Monday it will pay $1.1 billion for the popular blogging service Tumblr, in a bold but risky move that CEO Marissa Mayer called a "game-changer" aimed at adding new and younger users to Yahoo's Web audience.

"On many levels, Tumblr and Yahoo couldn't be more different, but at the same time they couldn't be more complementary," Mayer said on a conference call announcing the deal. She described Tumblr as "home to one of the world's most creative groups of storytellers."

As expected, Mayer said Tumblr founder David Karp will continue to run the service as a separate, New York-based entity within Yahoo. Yahoo will work with Tumblr -- which has a trendy reputation among younger Internet users as a place to share musings, photos and creative visual work -- to help it expand and gradually introduce more advertising, she said.

But in an acknowledgment that many Tumblr fans may be concerned that Yahoo would change the site, Mayer stressed repeatedly that "while we are acquiring the business, we are making a sincere promise to not screw it up."

Tumblr, which had only $13 million in revenue, has been very slow to introduce advertising on its site. Mayer said the company plans to increase advertising, noting that major Hollywood moviemakers and other commercial brands already have some presence on the Tumblr site. But she promised that Tumblr advertising will be in "native" and "high-quality" formats that appear similar to other Tumblr posts and do not seem jarring to the viewers.

Mayer told analysts that Tumblr has more than 300 million active users, which she said would combine with Yahoo's current audience of about 700 million users to give the company a reach of more than 1 billion people.

While there may be some overlap, she insisted the two companies mostly serve different age and interest groups.

Tumblr itself has previously claimed a smaller number of users and the research firm comScore put the number at 117 million in March. A Yahoo spokeswoman said Monday that 300 million is the most current figure.

Yahoo executives have acknowledged their goal to restore a "cool" factor for the struggling Internet pioneer, and Mayer repeatedly described Tumblr's users as young, creative types who can help fill that need.

She said Yahoo wants to introduce Tumblr blog content to the news feeds onYahoo's own sites, whichshe said could help draw Tumblr users to Yahoo properties.

Analysts say the deal, which is Yahoo's largest acquisition in nearly a decade, could help Mayer in her effort to jump-start a company that has been falling behind rivals such as Google andFacebook in the competing for advertisers' dollars.

But some observers are skeptical about what will happen when the older company, widely viewed as stodgy and slow, tries to assimilate the upstart Tumblr.

Yahoo is still struggling with other aspects of its business, Carlos Kirjner of the Sanford Bernstein investment firm wrote in an email. "Therefore, we see the relatively large $1.1 billion cash acquisition as risky and likely premature."

Mayer, however, insisted the deal represents "an incredible step forward and an accelerator in Yahoo's growth story."

She also praised Tumblr's mobile Internet platform and said she hopes Yahoo will benefit from Tumblr's experience in building a service for users of smartphones and tablets, where Yahoo is also working to increase its audience.

Karp will continue to run the Tumblr operation from its base in New York, and will report directly to Mayer, according to Yahoo Chief Financial Officer Ken Goldman, who said the acquiring company plans to increase the size of Tumblr's engineering and advertising staff.

Karp, who started Tumblr six years ago, went on to praise Mayer and Yahoo, saying the acquiring company will provide Tumblr with resources to grow, before closing his post with an upbeat and enthusiastic four-letter expletive.

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