Yahoo on Tumblr: We won't 'screw it up'

Yahoo will now have to figure out how to grow Tumblr revenue without alienating its user base

Yahoo has confirmed widespread reports that it will acquire the popular blogging service Tumblr, and also promised not to "screw it up." The deal is worth about US$1.1 billion, nearly all in cash.

"Per the agreement and our promise not to screw it up, Tumblr will be independently operated as a separate business," Yahoo said in a statement on Monday. Tumblr CEO and founder David Karp will remain in that position and its "product, service and brand will continue to be defined and developed separately with the same Tumblr irreverence, wit, and commitment to empower creators," the statement added.

Yahoo is hoping Tumblr's fast growth and widespread appeal will give it a fresh foothold in the competitive social media advertising market. Tumblr has 120,000 new users sign up each day and 300 million unique visitors monthly, Yahoo said.

Combined, the companies will boost Yahoo's audience by 50 percent, reaching more than 1 billion visitors per month, according to the announcement.

Yahoo may be wise to emphasize at the outset that it plans to handle Tumblr with kid gloves.

The service has a solid base of devoted users who are passionate about its creative and community-building power and their fear of the effects of commercialization under Yahoo is palpable, according to Gartner analyst Andrew Frank.

"They fear loss of control over the interface, over privacy, and over the freedom of expression in general," Frank said via email.

The price Yahoo is paying for Tumblr is more than 84 times the $13 million in revenue Tumblr generated last year, a considerable multiple in any acquisition.

A big challenge for Yahoo, therefore, will be to determine how to boost the revenue of Tumblr, which is currently very light on ads, without ruining the experience for users, according to Forrester Research analyst Zachary Reiss-Davis .

This is just the latest attempt by Yahoo to jump-start its business by scooping up a hot social media property, and it remains to be seen what reward Yahoo will reap from this deal.

Deals that didn't deliver the expected results include Yahoo's acquisitions of social bookmarking site Delicious, blog social network MyBlogLog and enterprise email vendor Zimbra.

Tumblr and Yahoo officials are expected to discuss the deal further during a conference call on Monday.

(With reporting by Juan Carlos Perez in Miami and Zach Miners in San Francisco.)

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris' email address is Chris_Kanaracus@idg.com

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Chris Kanaracus

IDG News Service
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