Internet pioneer Yahoo has confirmed that it intends to purchase popular blogging website Tumblr for more than $AU1.1 billion. Analysts say the acquisition is part of an effort by Yahoo to connect with a younger, hipper crowd as part of its battle to revive an ailing audience, and to up the fight with rival search engine Google’s global domination.
Tumblr, which was founded in 2007 by a high school drop out, is now one of the web’s most popular social media sites. Yahoo has been searching through a range of possible acquisitions since the mighty Ms Mayer took the helm last year, vowing to revive the company, which has seriously wilted in the face of competition from Google.
Tumblr could be key to Yahoo’s strategy, its popularity with younger internet users is unsurpassed. A survey this year conducted by the online data group Survata found Tumblr more popular than Facebook among those aged 13 to 25. While Tumblr generates very little cash, bringing it in the Yahoo family could offer the potential for new advertising and other revenue sources ::::
“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.
Tumblr’s chief executive David Karp will continue in the role and the Tumblr product, service and brand will continue to be defined and developed separately, the struggling internet pioneer said.
“Tumblr is redefining creative expression online,” Yahoo chief executive Marissa Mayer said. “On many levels, Tumblr and Yahoo couldn’t be more different, but, at the same time, they couldn’t be more complementary. Yahoo is the internet’s original media network. Tumblr is the internet’s fastest-growing media frenzy.”
Mr Karp, in a statement to “the Tumblr community”, said the team was not changing.
“Our roadmap isn’t changing,” Mr Karp said. “And our mission – to empower creators to make their best work and get it in front of the audience they deserve – certainly isn’t changing. But we’re elated to have the support of Yahoo and their team who share our dream to make the internet the ultimate creative canvas.”
The deal is expected to close in the second half of the year. However, analysts questions the wisdom of Yahoo’s purchase.
Yahoo has been looking at a range of possible acquisitions since Ms Mayer took the helm last year and vowed to revive the company, which has faded in the face of competition from Google.
Tumblr could be key to Yahoo’s strategy because of its popularity with younger internet users. A survey this year conducted by the online data group Survata found Tumblr more popular than Facebook among those aged 13 to 25.
While Tumblr generates very little cash, bringing it in the Yahoo family could offer the potential for new advertising and other revenue sources.
Roger Kay at Endpoint Technologies said the deal “brings a social element that Yahoo is missing and a set of new users”. But Mr Kay added that “paying $1.1 billion for a company with $13 million in revenue seems a little nuts to me”.
“Those numbers aren’t even earnings, which are surely negative,” Mr Kay said. “So, even if Tumblr survives intact, Yahoo is unlikely to get its $1.1 billion back over any interval that falls within a human lifetime.”
Founded in 2007 and headquartered in New York, Tumblr says it has more than 108 million blogs, 50 billion postings in 12 languages and 175 employees. The website ranking site Alexa lists Tumblr as number 32 in terms of global popularity.