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Yahoo’s Board of Directors reported earlier this month that it is acquiring blogging platform Tumblr for a purchase price of $1.1 billion. According to Yahoo’s chief executive Marissa Mayer, the plan is to keep Tumblr on as an independent company and leave 26-year old founder David Karp in place as CEO. It will take time to finalize the deal, however – the purchase isn’t anticipated to close until later in 2013.
Mayer's purchase is the largest social media acquisition of a social networking company in years — even larger than Facebook’s purchase of Instagram last year. Some developers worry about the change, but Tumblr's Karp assures the move will keep the creative focus intact. So what does the big purchase really mean? Let’s find out!
The Younging of Yahoo
First and foremost, the sale means that Yahoo will get a facelift — younger demographics that is. Tumblr currently has 300 million users, mostly in the 18-24 age range, and membership is growing by 120,000 signups a day. The acquisition is part of CEO Mayer's effort to energize the company with new ideas, talent and a younger demographic to better tap the mobile market.
Bringing Tumblr Features to Yahoo!
Tumblr was founded in 2007 as a place to merge blogging with social media. Designers and writers can use it as a publishing platform to post blogs and photos, follow other users and generate RSS feeds. Tumblr is expected to function independently even after the sale, but the acquisition should bring some new features to Yahoo, such as better social media integration and new search results.
By the numbers, Tumblr will bring more than 100 million blogs and 50 billion blog posts to Yahoo’s media network. That move is expected to increase web traffic on Yahoo by up to 20%. And although Tumblr doesn’t currently have a strong revenue model, the buyout is hoped to boost Yahoo’s advertising revenue model. Mobile advertising is another avenue of revenue since Tumblr users are reported to be on mobile apps an average of 7 times per day.
Of course, the acquisition isn’t without some concerns. The blogs on Tumblr contain a fair amount of unsavory content, such as pornography. And the previous acquisitions of Flickr ($35 million), MyBlogLog ($10 million) and GeoCities ($3.6 billion) have yet to prove their worth. Nonetheless, Yahoo is hoping these startup acquisitions will help it improve its market share of digital ad revenue (which currently is less than 10%). What's next for Yahoo? Mayer now has her sights on other start-ups like Hulu and Foursquare, but only time will tell if Yahoo’s future looks brighter.