Yahoo Acquires Tumblr For $1.1 Billion

yahoo tumblr logos

Tumblr CEO David Karp announced the successful acquisition of his product by old-school tech giant Yahoo in three simple words: “Fuck yeah, David,” in recent blog post. The casual language used in his announcement emulated the merger of the new social networking site with the more traditional company that bought it. Meanwhile, Yahoo’s CEO Marissa Mayer also announced the deal in social media, promising “not to screw it up.

Yahoo’s board voted to pay $1.1 billion for the popular blogging service Sunday night in an effort to reposition itself in a technology industry that now revolves around social media. The deal is one of the largest-ever acquisitions of a social networking company, exceeding Facebook’s acquisition of Instagram for $1 billion last year. The purchase is a major one for Yahoo CEO Marissa Mayer, who hopes Tumblr will breathe new life into the search site founded in 1995. It marks the seventh acquisition since Mayer left Google to helm Yahoo last year. But most of those purchases were designed for Yahoo to acquire new talent, rather than growing its user base. With more than 108 million blogs, Tumblr has the opportunity to help Yahoo appeal to young users and atone for years that Yahoo has fallen behind the social networking revolution. Tumblr combines the best elements of the major social networking sites—users can share and post photos like Instagram, GIFs and videos like YouTube, as well as browse its news feed like Facebook and Twitter.

But will Tumblr make money for Yahoo? Although the company has attracted a loyal following and raised millions in investment dollars since its founding six years ago, it has not yet proven whether it can be profitable. It also has yet to show it can succeed on mobile devices.

The challenge has always been, how do you monetize eyeballs?” Charlene Li, the founder of the Altimeter Group, a consulting firm, told the New York Times. “Services like Instagram and Facebook always focus on the user experience first. Once that loyalty is there, they figure out how to carefully, ideally, make money on it.

Mayer also has an opportunity to show can successfully acquire another site and not allow it to fall flat. Yahoo has previously paid big money for other technology startups—such as its $35 million purchase of Flickr and $3.6 billion purchase of GeoCities, for example—and neglected to grow the companies. The Tumblr acquisition shows promise, however, since Karp—who dropped out of high school at the age of 15—will continue to head the company his founded.

David Karp will remain CEO. The product, service and brand will continue to be defined and developed separately with the same Tumblr irreverence, wit, and commitment to empower creators,” a statement from Yahoo said.

Karp also reassured his 700 million users they won’t see any drastic changes to the blogging site.

Before touching on how awesome this is, let me try to allay any concerns: We’re not turning purple. Our headquarters isn’t moving. Our team isn’t changing. Our roadmap isn’t changing. 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,” Karp, said in his blog post.

“The product roadmap, their team, their wit and irreverence will all remain the same as will their mission to empower creators to make their best work and get it in front of the audience they deserve.  Yahoo! will help Tumblr get even better, faster,” Karp added.

Although Yahoo’s stock has risen 14 percent in the past month, shares have remained flat since the Sunday night announcement of the acquisition, rising less than 1 percent. The future looks bright, however, as the addition to Tumblr promises to expand Yahoo’s audience by 50 percent to more than 1 billion monthly users, as well as increase its traffic by about 20 percent. The transaction is expected to close in the latter half of 2013.