Yahoo confirms $1.1bn Tumblr acquisition

Internet giant Yahoo has confirmed that it is to acquire blogging network Tumblr for about $1.1 billion (€ 856m), in an effort to lure more users and advertisers and transform the internet portal into a social media player.

Following speculation at the weekend, Yahoo chief executive, Marissa Mayer confirmed the deal via her Tumblr account today, where she promised not to "screw up" the popular blog network. Founded in 2007, Tumblr has grown to log more than 13 billion global page views in the past month. The site offers a free service for publishing blogs on the Web and mobile devices, and tools for sharing photos and other content across social networks.

Following the acquisition, Tumblr will be run as an independent company, with chief executive and founder David Karp (26) remaining in charge. Karp will become a multimillionaire out of the deal, having founded the company using money and experience he had acquired as a software consultant for the website UrbanBaby

Yahoo, which makes almost all of its revenue from online promotions, will inherit the challenge of making money from a site while trying to preserve its cool factor. While Tumblr recently began letting advertisers pay for prominent placement and has said it expects to become profitable this year, Karp has resisted covering webpages with promotions to avoid alienating Tumblr’s younger audience.

Tumblr’s content may also pose the risk of turning off some of Yahoo’s advertisers. The site’s terms of service permit nudity and other controversial material, and at least one pornographic site ranks among the 20 most-popular Tumblr blogs, according to Quantcast Corp. Among Tumblr’s backers, Union Square Ventures in New York and Boston-based Spark Capital are the biggest winners. The firms led Tumblr’s first two financings, a $775,000 round in 2007 and a $4.5 million round the next year. Sequoia Capital joined as an investor in late 2010 as part of a $30 million funding round.

Mayer has purchased at least 11 companies in her 10 months as CEO, from mobile app makers Stamped Inc. and Jybe Inc. to Summly, the news-reading application created by teenager Nick D’Aloisio. Before Tumblr, most of her acquisitions have been small and focused on talent acquisitions -- small teams bought at low prices -- an approach she advocated during her first conference call with analysts last year. Tumblr ranks among Yahoo’s largest acquisitions, which include the $5.7 billion purchase of Mark Cuban’s Broadcast.com and a $3.6 billion deal for Web-hosting site Geocities in 1999.

(Additional reporting Bloomberg)