What does Yahoo want with Tumblr?

Yahoo has confirmed that it will acquire Tumblr for $1.1 billion – most of which will be paid in cash. 

Reuters
A photo illustration shows the applications of Yahoo and Tumblr on the screen of an iPhone in Zagreb, Croatia, on May 20, 2013.

Yahoo has confirmed that it will pay approximately $1.1 billion, mostly in cash, to acquire the microblogging platform Tumblr. According to reps for Yahoo, the deal will likely close in the second half of the year. In a press release, Yahoo CEO Marissa Mayer sought to allay the concerns of the millions of regular Tumblr users, some of whom reportedly fled the site after news of acquisition first began circulating on Sunday afternoon. 

"On many levels, Tumblr and Yahoo! couldn't be more different, but, at the same time, they couldn't be more complementary," Ms. Meyer said. "Yahoo is the Internet's original media network. Tumblr is the Internet's fastest-growing media frenzy. Both companies are homes for brands – established and emerging. And, fundamentally, Tumblr and Yahoo! are both all about users, design, and finding surprise and inspiration amidst the everyday."

So what does Yahoo want with Tumblr, anyway? Well, the short answer is this: cultural cache. Yahoo, by the standards of the Internet, is a dinosaur – bloated, slow-moving, not particularly hip. Tumblr – as Meyer notes above – is the opposite. It's a young company, founded by a 26-year-old high school drop-out named David Karp. And it has a young base of users, which is particularly attractive to advertisers. 

Moreover, as the Wall Street Journal notes today, "[m]uch of the content that people post on Tumblr – from fashion and art to food and travel – doesn't overlap with what is on Yahoo, which is strong in categories like sports, finance and news." In other words, Yahoo, in gobbling up Tumblr, won't risk cannibalizing much of its own business – the acquisition could be a real "value add," to use the tech industry parlance. 

Of course, as Gina Chon of Quartz points out, no matter how flashy the Tumblr acquisition is, in many ways, Yahoo is still a struggling company. 

Yahoo, she writes, "has a ways to go to bring in advertising. Yahoo’s $1.07 billion revenue for the first quarter missed the very modest 2 percent bump that analysts had expected. Display advertising and search revenue were all down. The billion-dollar question remains: Tumblr may transform Yahoo’s reputation among hipsters, but will Yahoo still need help on the crucial revenue front?" 

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