Yahoo's board of directors has approved spending US$1.1 billion in cash to buy popular blogging site Tumblr, according to The Wall Street Journal.
The plan is for Tumblr to operate as an independent business, the Journalreported on Sunday, quoting anonymous sources.
Asked via email about the Journal's report, a Yahoo spokesperson declined to comment. Tumblr didn't immediately respond to a request for comment.
Ads threaten Tumblr users
Tumblr has a solid base of devoted users who are passionate about its creative and community-building power and their fear of the effects of commercialization under Yahoo is palpable, according to Andrew Frank, a Gartner analyst.
"They fear loss of control over the interface, over privacy, and over the freedom of expression in general," Frank said via email.
Thus, for the acquisition to be successful, Yahoo must strike a balance between keeping Tumblr users engaged and delivering a positive return to Yahoo shareholders through advertising. "It will be a daunting challenge which will shed light on the future of both Yahoo and creative social self-expression," Frank said.
Zachary Reiss-Davis, a Forrester Research analyst, also said that a big challenge for Yahoo will be to determine how to boost the revenue of Tumblr, which is currently very light on ads, without ruining the experience for users.
"For this to make sense for Yahoo, it has to keep Tumblr's current active user base passionately engaged and spending time on the site, while also finding a way to add advertising," Reiss-Davis said. "This will be a hard balancing act for Yahoo, given its mediocre record in the past regarding acquisitions."
Yahoo has called a mystery press event in New York City on Monday afternoon, hot on the heels of rumors that it plans to buy Tumblr for $1 billion.
"Join us as we share something special," says the invite, sent to members of the press Friday afternoon.
Citing unnamed sources, All Things D reported earlier Friday that Yahoo may be in talks to partner with Tumblr, invest in it, or make an outright purchase. It notes that Yahoo's CFO talked earlier this week about the need for Yahoo to bring back its "cool."
Adweek, in another report citing unnamed sources, put the value of the deal at $1 billion.
Marissa Mayer is expected to be at the New York City event, according to CNBC. Tumblr's headquarters are in New York.
After a weekend chock full of rumors and speculation, Yahoo has announced it plans to acquire Tumblr, the popular social service that hosts more than 105 million GIF-filled blogs, for $1.1 billion in cash.
That's a whole lot of users, and a whole lot of cash. In her announcement—appropriately posted on Yahoo's Tumblr blog—Yahoo CEO Marissa Mayer promised “not to screw it up.”
The deal is the largest made by Marissa Mayer since she took over Yahoo last summer and follows nine other acquisitions by the company. The Tumblr transaction, which is subject to customary closing conditions, is expected to take effect in the second half of the year.
Founder David Karp will continue as chief executive officer of Tumblr and “the product roadmap, their team, their wit, and irreverence will all remain the same,” Mayer said.
The heads of the two companies took to Tumblr to explain the union and (hopefully) alleviate some fears.
Yahoo needs to prove its street cred to get in with the under-30 crowd, so the company is reportedly mulling a $1 billion bid for Tumblr, the social network where animated GIFs and all sub-genres of cats run amok.
Yahoo is considering either a significant investment in Tumblr or an outright acquisition of the 4-year-old micro-blogging site, according to All Things D.
Tumblr has some 54 million users and more than 100 million blogs, and nearly half of Tumblr’s visitors are in the coveted 18- to 34-year-old demographic, according to comScore. The benefits of a Tumblr acquisition are obvious for Yahoo, which is looking to shake up its square image. A major backer could be useful for Tumblr, which has been exploring money-making opportunities with promoted posts (otherwise known as ads).
Yahoo has promised “not to screw up” Tumblr now that it has acquired the freewheeling blogging site. But there are still several ways Tumblr could get better, and worse, as a Yahoo-owned company.
On the bad side, there’s the threat of excessive advertising.
“Tumblr has been unprofitable, and Yahoo has to figure out how to monetize it,” said Forrester Research analyst Zachary Reiss-Davis.
“But it has to incorporate ads tastefully,” he added. Failing that, Yahoo may not have much of a user base to advertise to. Matt Mullenweg, the founder at rival blogging site WordPress, has already reported a massive uptick in its blog post import rate from Tumblr.
Ads do currently appear on Tumblr in the form of sponsored posts within users’ feeds, but they are far from being ubiquitous. Sponsored posts have only been on the desktop version of Tumblr for about a year; mobile ads only just rolled out last month.
Yahoo won't ruin Tumblr, CEO Marissa Mayer says, but Tumblr users are understandably skeptical of that promise. Yahoo has a history of buying popular properties (Flickr, Delicious) and letting them wither away. But Tumblr will change. It has to. Yahoo must monetize the popular platform to justify its $1.1 billion price tag. And you know what that means: More ads.
What to expect in the Age of Yahoo
Tumblr has been experimenting with advertising for the last year, though founder David Karp has in the past expressed his strong dislike of online ads. Tumblr currently allows promoted posts on desktop and mobile version of the site and has experimented with interactive brand campaigns, but that’s it—so far. In a Monday morning conference call, Mayer said the company will be experimenting with different ways to advertise, including ads within users’ dashboards—Tumblr’s version of a news feed, which only bloggers see, not viewers. Another possibility involves Yahoo partnering with bloggers to display targeted ads on blogs. Mayer said bloggers would have to give permission for that to happen.
Native ads (also known as sponsored posts that look like real content, but are actually paid advertising) are all the rage these days, but Tumblr has struggled to make those ads translate into revenue. The power of Yahoo's massive sales team could change that.
In her announcement, Mayer promised Tumblr’s 105 million bloggers and 300 million visitors that they would “not screw it up”—but that hasn’t convinced everyone.
In a blog post Sunday, Matt Mullenweg, founding developer of rival blogging site WordPress, wrote that the number of blog imports from Tumblr to WordPress spiked from a normal of 400 to 600 an hour to more than 72,000.