Yahoo’s board has reportedly approved a deal to purchase blogging startup Tumblr for $1.1 billion. It is not yet clear whether Tumblr’s board has also approved the deal. If successful, Tumblr would continue to operate largely as an independent business.
A source close to the deal told The Wall Street Journal that the agreement was approved in a meeting by telephone on Friday. He said the deal could be announced as early as Monday.
Tumblr climbed to success shortly after launching in 2007 by making it easy for people to post blogs and photos, follow other people on Tumblr, and receive updates. It is continuing to grow at a rapid pace – the site had reached about 117 million unique users worldwide in March, up from around 58 million a year earlier, according to comScore.
Upon acquiring Tumblr, Yahoo would gain a social media site which hosts communication and blogging for millions of people. However, the site generates little profit. Tumblr, which began placing ads on its site just last year, generated $13 million in revenue last year, Tumblr Chief Executive David Karp said in a recent statement.
Yahoo believes it could help the blogging site bring in more money by selling ads and boosting its own revenue in the process, sources said. Yahoo Chief Executive Marissa Mayer, who joined the company last summer, became interested in Tumblr a couple of months ago, a source said. Acquisitions were expected to be part of Mayer’s strategy although she has only acquired small companies in the past.
In the fall of 2011, Tumblr’s $85 million venture-capital investment valued the company at $800 million. Yahoo is also expected to deliver an update about its Flickr photo-sharing site on Monday, according to a source.