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Yahoo Is Planning to Buy Tumblr for $1.1 Billion Yahoo Is Planning to Buy Tumblr for $1.1 Billion
(about 3 hours later)
Yahoo’s board has agreed to buy Tumblr, the popular blogging service, for about $1.1 billion in cash, people with knowledge of the agreement said on Sunday.Yahoo’s board has agreed to buy Tumblr, the popular blogging service, for about $1.1 billion in cash, people with knowledge of the agreement said on Sunday.
The deal, sealed at a meeting of Yahoo’s board, is expected to be announced as soon as Monday, said one the people, who was not authorized to speak ahead of the announcement. The deal, sealed at a meeting of Yahoo’s board, is expected to be announced as soon as Monday, said one of the people, who was not authorized to speak ahead of the announcement.
A spokeswoman for Yahoo declined to comment. A representative from Tumblr was not immediately available. The acquisition is the biggest yet under Yahoo’s chief executive, Marissa Mayer, as she tries to reinvent the once-embattled Web pioneer’s fortunes. Under her, the company is seeking to make up for years of missing out on the growing use of social networks and mobile devices.
The acquisition is the biggest yet under Yahoo’s chief executive, Marissa Mayer, as she attempts to reinvent the once-embattled Web pioneer’s fortunes. Under her, the company is seeking to make up for years of missing out on the growing use of social networks and mobile devices. Buying Tumblr, which was founded in 2007 by David Karp, who is 26, is intended to help address that shortfall. A number of well-known tech founders dropped out of college before making millions from their start-ups, but Mr. Karp didn’t even make it out of high school, dropping out at age 15.
Buying Tumblr is intended to help address that shortfall. The six-year-old company is one of the most popular blogging services, with over 108 million blogs. Buying the company could provide a wealth of user-generated content. The deal marks Yahoo’s seventh acquisition since Ms. Mayer took the helm last year. Starting in July, she began acquiring small start-ups, including OnTheAir, an online video service; Propeld, a maker of location-based apps; and Summly, a newsreading mobile app. In most cases, the acquisitions were made more for the engineering talent than for the products.
The acquisition will be a test for Ms. Mayer, who will have to ensure that Tumblr does not get lost inside Yahoo. In the past, acquisitions made by Yahoo’s former chiefs, including Geocities, an early social site, and Flickr, the popular photo-sharing Web site, have either been shuttered years later or neglected within the company. Ms. Mayer has been simultaneously looking for a big-ticket deal, using the $4.3 billion in cash Yahoo reaped from a sale of half its stake in Alibaba, the Chinese Internet company, last year.
Yahoo and Tumblr have been in talks since last week trying to finalize details of the acquisition. Facebook, Microsoft and Google all showed interest previously in purchasing Tumblr, an employee of Tumblr said, but those talks never culminated in final offers. In the last year, Yahoo has been in talks with a number of larger start-ups, including Foursquare, Quora, Hulu and Dailymotion, the French video service, about a potential acquisition, according to people briefed on those discussion who were not authorized to speak publicly.
Tumblr was founded in February 2007 by David Karp, who is 26. According to the company’s latest statistics, Tumblr has 175 employees and has raised more than $125 million in venture funding from several big-name firms including Union Square Ventures, Spark Capital and Betaworks. It is unclear if all of the company’s 175 employees would become Yahoo employees, too. With Tumblr, Ms. Mayer will finally get the one thing that has long eluded the Internet company: a large social network with a loyal following. Tumblr has more than 100 million blogs on its site, reaching 44 million people in the United States, and 134 million people globally, according to Quantcast, which measures Internet traffic.
But Yahoo does not need the traffic. With 700 million users, Yahoo still draws one of the largest audiences on the Web. More people use Yahoo’s e-mail service than any other service, and Yahoo Finance and Yahoo Sports are some of the most popular destinations in their categories.
“You would think they have plenty of page views,” said Colin Gillis, an Internet analyst at BGC Partners. “They’re paying through the nose for it, but Yahoo is after a demographic it has lost.”
What Yahoo wants is “stickiness,” products and services that make Yahoo a habitual destination for users and, more important, advertisers.
Yahoo, once the biggest seller of display ads in the United States, has been ceding market share to its competitors at Google and Facebook. The company went from a leading 15.5 percent share of all digital ad revenues in the United States in 2009, to an 8.4 percent share last year, even as total digital ad spending grew, according to eMarketer. Google has increased its share to 41 percent during that period.
It is not immediately clear how Yahoo will monetize Tumblr. The blogging site has been trying to create unique advertising opportunities — rather than profiting from clicks on ads — and been trying to entice advertisers to create and promote creative interactive campaigns, with mixed success.
Tumblr has been burning through cash, spending an estimated $25 million last year, while pulling in just $13 million in revenue. Mr. Karp, its founder, has eschewed advertising in favor of a minimalist approach, and only started serving users ads last May.
The company also has a fair amount of unsavory content that advertisers may not want to be associated with. Pornography represents a fraction of content on the site, but not a trivial amount for a site with 100 million blogs.
Tumblr also lacks a strong mobile platform, which Yahoo desperately needs. Tumblr’s strong presence on the Web — it is the 24th most-viewed site on the Internet, according to Quantcast — has not yet translated to mobile.
Yahoo missed the transition from the Web to smartphones as gateways for information and entertainment, and has been struggling to gain a foothold in the mobile advertising arena. Without its own mobile hardware and operating system, the company is far behind competitors at Google and Apple. Ms. Mayer has said she planned to catch up by acquiring mobile companies, which Tumblr is not.
But Yahoo will get a demographic it has lost. Most of Yahoo’s growth the past several years has come from abroad. Inside the United States, the company has struggled to make its brand stand for something. Until a recent home page improvement, Yahoo’s site had a claustrophobic feel — ads and content jumbled together.
“This is not an inexpensive acquisition, but they’re willing to pay to get back some of what they’ve lost,” said Mr. Gillis, who likened the Tumblr acquisition to AOL’s 2010 acquisition of TechCrunch, a popular technology blog. “They want to be hip.”
Many Tumblr users, however, were distraught by news of the acquisition. Some took to their blogs to post angry comments. One read: “Dear Yahoo, We bite. Sincerely Every Tumblr user. Ever.”
Analysts hope Yahoo does not make the same mistake it made in 1999 when it acquired GeoCities, then a fast-growing Web community, paying $3.6 billion only to see it shut down.
“This could be GeoCities 2.0,” Mr. Gillis said. “That’s a quarter of their cash they just spent. But shareholders are going to have to wait to judge them.”
According to Tumblr’s latest statistics, the company has 175 employees and has raised more than $125 million in venture financing from several big-name firms, including Union Square Ventures, Spark Capital and Betaworks. It is unclear if all of the company’s employees would become Yahoo employees.
Yahoo and Tumblr have been in talks since last week trying to complete details of the acquisition. Facebook, Microsoft and Google all showed interest previously in buying Tumblr, an employee of Tumblr said, but those talks never culminated in final offers.
The deal was first reported by the technology news site AllThingsD.The deal was first reported by the technology news site AllThingsD.