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Yahoo Tumblrs for Cool: Board Approves $1.1 Billion Deal as Expected

The Yahoo board has approved a massive $1.1 billion all-cash deal to buy Tumblr.

It’s not clear when the official vote was taken, but sources close to the board said the acquisition was a foregone conclusion and was unanimously approved by the directors of Silicon Valley Internet giant.

The deal will likely be announced Monday morning, said numerous sources. initially broke the story of the acquisition efforts and later followed up with details of the exact price and the board meeting to approve the transaction.

There were no other competing bids, despite reports, to snap up the New York-based social blogging service. That said, Tumblr had held some very preliminary discussions about various deals with Facebook, Google, Microsoft and also Twitter earlier this year.

As part of the Yahoo deal, Tumblr CEO David Karp — who will get a windfall of cash from the acquisition — will stay at Yahoo for four years at least and retain a lot of control over the service, much in the same way Instagram CEO Kevin Systrom does at Facebook. But, as there, Yahoo will undergird Tumblr’s nascent advertising business with its large and established infrastructure, said sources.

Yahoo had been mulling some kind of deal with Tumblr, from a strategic investment to an outright acquisition, for about six weeks. Sources said that Yahoo CEO Marissa Mayer had decided that buying the company was going to be “the stake in the ground of what her strategy is going forward for Yahoo.”

And that is to attract younger audiences with just the kind of user-generated content Tumblr has pioneered to impressive growth.
According to numerous sources, Mayer determined quickly in her research that the site was just the kind of property that Yahoo needed to make it both “cool” and relevant to new consumers.


At this price, it will be Mayer’s biggest acquisition so far. Since she became CEO last summer, Mayer has made only a series of small acquisitions of mobile startups at a low cost.

According to sources, the Tumblr brand will continue.

The deal, if consummated, will be a big win for investors. In a series of fundings since 2007, Tumblr has raised $125 million so far and is now at a reported valuation of $800 million. Investors include Spark Capital, Union Square Ventures, Sequoia Capital, Greylock Partners, Insight Venture Partners and the Chernin Group.


Like other recent Web startups that have seen rocketship growth — see: Twitter, Facebook — Tumblr resisted advertising for its formative years, and its user base seems particularly unwilling to accept standard banner ads. In addition, many industry observers think that Tumblr’s pages are packed with porn or other questionable content that would scare off advertisers.

But within the last year or so, Tumblr has started selling modestly sized “native ads” promoting brands’ Tumblr pages, on users’ “dashboards,” which has shown promise. Tumblr has said it had $13 million in revenue last year and sources said it could get up to $100 million this year.
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