Yahoo Buys Tumblr Social Network Service for $1.1 Billion

Yahoo CEO Marissa Mayer vows not to "screw" up the company.

ByABC News
May 20, 2013, 8:55 AM

May 20, 2013 — -- Yahoo is investing big-time in the social media. The company announced today that it has purchased Tumblr, the popular blogging and social media network, for $1.1 billion.

"I'm delighted to announce that we've reached an agreement to acquire Tumblr!," Marissa Mayer, the CEO of Yahoo, announced on her own Tumblr blog this morning. "We promise not to screw it up. Tumblr is incredibly special and has a great thing going. We will operate Tumblr independently."

Mayer repeated in a company statement that Yahoo will "not screw it up." It plans to keep Tumblr an independently operated business with David Karp, Tumblr's 26-year-old founder and CEO, remaining on. Tumblr allows users to create their own blogs, follow other blogs on the network and like them or reblog posts.

"We're not turning purple," Karp announced on Tumblr's official Tumblr News page. "Our headquarters isn't moving. Our team isn't changing. Our roadmap isn't changing. And our mission – to empower creators to make their best work and get it in front of the audience they deserve – certainly isn't changing."

While Yahoo promises not to change Tumblr's product the companies will now work together to create advertising opportunities. Mayer also says that the companies together will create a very large media network.

"On many levels, Tumblr and Yahoo! couldn't be more different, but, at the same time, they couldn't be more complementary," Mayer said in a statement. "Yahoo is the Internet's original media network. Tumblr is the Internet's fastest-growing media frenzy."

Mayer, 38, took over as Yahoo CEO in July 2012 after over 10 years at Google. At Yahoo she is aiming to turn the company around, investing heavily in mobile products and reinvigorating current products, including Yahoo Mail. She has also overseen the purchase of other companies, including Summly, Astrid and GoPollGo.

However, Tumblr will be the largest acquisition of Mayer's to date. And she and the Yahoo Board, which voted on the acquisition over the weekend, are hoping Tumblr is one of the answers to making the company a real tech player again. Analysts and reports also say that Tumblr had a "cool" appeal to Mayer and the Board.

"For all intents and purposes, Yahoo as a media brand skews toward older demographics. Tumblr is ridiculously strong in terms of engagement among Millennials and to some extent Generation Y," Brian Soils, a principal analyst at Altimeter Group, told ABC News. "The trick for Marissa and co. is to do so without diluting the Tumblr secret sauce while drafting enough of the Tumblr brand to make Yahoo cool again," he added.

However, some financial analysts believe Yahoo simply paid too much for the company. Rick Summer, an analyst with investment firm Morningstar, said the "deal is probably overpriced" in his analyst note. "In our view, Yahoo has essentially paid a high price for incremental page views without filling in gaps in the business," he added. Summer also points out that one of the factors that has made Tumblr popular with users is the lack of advertising, something which may be difficult to maintain as Yahoo looks to monetize the service.

Founded in 2006, Tumblr, which has just 175 employees, has over 300 million monthly unique visitors and 120,000 signups every day. According to Tumblr, 90 million posts are posted on Tumblr every day with 900 posts per second; there are a total of 100 million blogs on the service.

Yahoo will hold an event on Monday evening, May 20, 2013 in New York City to announce a new product. Mayer will be in attendance, although according to ABC News' own sources and Bloomberg, that event will focus on Flickr, the company's photo-sharing service.