Yahoo buy Tumblr for $1.1bn in cash

Blogging platform Tumblr was bought by Yahoo yesterday for an astonishing $1.1bn in cash.

 

The deal is the biggest that Marissa Mayer has made since she took charge of Yahoo last July, and she described the acquisition as a ‘unique opportunity’. She added, ‘On many levels, Tumblr and Yahoo couldn’t be more different, but at the same time they couldn’t be more complimentary.’

 

While the acquisition is a huge step for both companies, current Tumblr users have expressed concern over Yahoo’s acquisition of the company. Users fear that Tumblr, which hitherto has resisted advertising, could become plagued by Yahoo advertising schemes to boost the revenue obtained from the blogging platform.

 

This fear is reinforced by beliefs that Yahoo have overpaid for the acquisition of Tumblr. The $1.1bn price tag for Tumblr represents a large premium on its $800m valuation when it last raised money from private investors. The sum that Yahoo have paid is then ten times the revenue.

 

According to Tumblr it currently hosts 108 million blogs, with total to 50.7 billion posts. Though, despite its rapidly growing user base it has struggled to make money through its lack of advertising.

 

The fact that Yahoo have paid such an overvaluation for the blogging platform has aroused fears that the popularity of Tumblr could leave it susceptible to user-alienating advertisement methods on the part of Yahoo, who acquires most of its revenue through advertising.

 

In an attempt to reconcile fears expressed by Tumblr users, Ms Mayer has promised ‘not to screw it up’ and Tumblr would operate independently with David Harp still playing the role of the chief executive of the company.

 

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