Yahoo (YHOO) Approves Billion-Dollar Tumblr Cash Deal

Yahoo (YHOO)’s board of directors has agreed to acquire popular social blogging platform Tumblr for $1.1 billion in cash, The New York Times reports. Details of the acquisition were first reported by AllThingsD on Thursday, which also cited the same cash figure. The deal, sealed at a meeting of Yahoo’s board, is expected to be announced at a press conference due on Monday in New York’s Times Square, just a couple of miles from Tumblr’s headquarters.

There is no denying that Yahoo has been on an acquisition tear since restructuring under new CEO Marissa Mayer: Summly, Astrid, GoPollGo, MileWise, Loki Studios have all been bought in the last month-and-a-half. The Tumblr deal however, the seventh since Mayer defected from Google (GOOG) 10 months ago to take over the web portal, is easily the largest profile purchase Yahoo has made. At $1.1 billion, the six-year-old company, which was founded in 2007 by David Karp, then 21, in a bedroom in his mother’s apartment in New York, would be a pretty expensive acquisition, given that Tumblr reportedly only booked $13 million in revenue last year.

But what Tumblr lacks in revenue, it makes up in popularity. In contrast with Yahoo’s older customer base, the blogging platform has become a major web content sharing destination for many younger adults. According to Quantcast, Karp’s fast growing community, which hosts over 108 million blogs and gets about 60 billion U.S. page views per year, had worldwide traffic of 217 million visitors in April, and was the US’s 24th most popular site, with about 75 million American users. This gives Tumblr, which is also growing more quickly on smartphones than Yahoo, a user base on a par with Yahoo’s own.

According to the Times, Mayer’s latest acquisition “is meant to give her company more appeal to young people, and to make up for years of missing out on the revolutions in social networking and mobile devices.”

Terms of the transaction reportedly provide for Karp, who is expected to get nearly $250 million from the deal, to remain with the company for at least four years, while running Tumblr as a quasi-independent unit of Yahoo.

It is unclear whether all of Tumblr’s 175 employees will move over to Yahoo.

Yahoo’s stock, which closed Friday at $26.52 a share, rose 2.19 percent to $27.10 in pre-market trading on Monday.

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