Yahoo Inc said on Monday it is acquiring blogging service Tumblr for $1.1 billion cash, a bold bet by chief executive Marissa Mayer to revitalise 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 multi-year 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 on Monday.
David Karp, who founded Tumblr in 2007, will remain CEO.
Tumblr is one of the Web’s most popular hubs of so-called 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.
Yahoo said the acquisition is expected to increase its audience by 50% to more than a billion monthly visitors.
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.