It’s 12:30 p.m. on Monday, so it’s probably old news to you already, but I’ll say it anyway: Yahoo is buying popular social blogging site, Tumblr, for a whopping $1.1 billion.
AllThingsD.com initially broke the story of the acquisition efforts, and reported that there were no other competing bids, despite reports, to snap up the New York-based social blogging service. However, 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 at least four years and retain a lot of control, much in the same way Instagram CEO, Kevin Systrom, does at Facebook. But Yahoo will secure Tumblr’s undeveloped advertising business with its large and established infrastructure.
Apparently 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,” which is to attract younger audiences with user-generated content and appear both “cool” and relevant. Tumblr’s strong mobile usage was also attractive to Yahoo.
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, according to an article on AllThingsD.com.
Tumblr’s worldwide traffic was at 117 million visitors in April, according to comScore. On its home page, Tumblr claims it has 107.8 million blogs and 50.6 billion posts. U.S. desktop traffic to Tumblr was 37 million in April, close to LinkedIn and Twitter, although Twitter obviously has much more via mobile.
But the million dollar question of how to make money from the site still remains, as it seems to for all social network behemoths. Tumblr initially resisted advertising, 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.