MUMBAI: Yahoo Inc will pay $ 1.1 billion cash for blogging service Tumblr in its attempt to connect with younger generation of users.
The deal which was announced on Monday 20 May is seen as a ‘bold’ bet by Yahoo CEO Marissa Mayer to revitalize the company by co-opting a Web property, report said.
Tumblr is one of the Web’s most popular hubs of so-called user-generated content, has more than 100 million blogs in its network.
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Media reports have pegged Tumblr’s 2012 revenue at $13 million. The Manhattan based privately held company does not disclose its financial results.
The combination of Yahoo and Tumblr is expected to create 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 news agency.
“Tumblr in terms of users and traffic is an immediate growth story for us,” she said.
Coinciding closely with Yahoo’s acquisition, Tumblr staged its first live TV integration with television broadcaster ABC’s “Billboard Music Awards” on Sunday night 19 May.
Analysts have reported said that 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.
Facebook bought the popular social media photo site Instagram for $1 billion last year. In 2006, Google paid $1.6 billion for YouTube.
Yahoo showed its sensitivity 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.
David Karp who founded Tumblr in 2007 will remain CEO.
Though Yahoo remains one of the Web’s most popular destinations, it has seen its revenue shrink in recent years as consumers and advertisers favor rivals such as Google Inc and Facebook.
The deal is expected to increase Yahoo’s audience by 50 percent.
