Yahoo’s Board Approves $1.1 Billion for Tumblr Deal

Michael Teague  |

The iconic Yahoo! (YHOO) sign went up in 1999 off the north side of highway 101 on the way into San Francisco, and had remained in the exact same spot since those exuberant days of the dot com boom, becoming as much a part of the city’s skyline as the Transamerica building, or even the clouds themselves.

The billboard’s disappearance, however, does not seem to be an indication that the company itself plans to go the same way.  On Sunday, the board of once dominant internet company Yahoo! Inc. (YHOO) reportedly approved a $1.1 billion deal to acquire social media site Tumblr.

The move is seen as one of the company’s most significant as it attempts to regain some of its former prominence under new CEO and former Google (GOOG) executive Marissa Mayer, who recently has drawn more attention for her stances on various aspects of workplace policy rather than the company’s strategic maneuvers.

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The Tumblr acquisition is far more significant.  The social networking site claims to host some 108 million blogs, over 50 billion posts, and has become one of the more viable alternatives to Twitter and Facebook (FB), particularly among young people.

After swearing off advertising for its early years, the site has increasingly resorted to ever more expansive forms of it.  Last year, the company claims to have made $13 million, and expects that could increase to $100 million by the end of 2013.

The acquisition is said to be a central focus for Mayer, one that would provide Yahoo access to a younger audience, already heavily engaged by Tumblr’s user-created content format.  Furthermore, Tumblr, while not as strong in mobile as the dominant competitors in the field such as Facebook and Twitter, is said, according to comScore to get about 25 percent of its traffic from mobile devices, a figure that is likely to increase, as more and more users access the internet through phones and tablets.  In April alone, the site had 117 million worldwide visits.

Tumblr, current CEO David Karp would remain at the helm of the company, reportedly under a four-year contract, and control diluted only by the process of integrating with Yahoo.  His company is reportedly worth some $800 million at the moment, but backed by Yahoo’s cash, no less its recent push to regain a larger share of the internet market, a deal could produce some favorable results for both companies, as well as for investors.

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