The board of Yahoo approved to purchase Tumblr, which is a popular blogging service, for around $1.1 billion in cash. The deal indicated that the company plans to get back its position as the technology industry tries to get into social media.
The deal is expected to be announced as soon as Monday. It would be the largest acquisition of a social networking company in recent years. It would be higher than what Facebook paid for Instagram last year, which was $1 billion.
It is a bold move for Yahoo to buy Tumblr as its chief executive Marissa Mayer tries to revive the company. She defected from Google last summer to head Yahoo and the move will be her biggest one yet.
While it has a lot of users, people are still wondering how Yahoo can make money out of Tumblr. The site has attracted loyal users and got millions from investors. But in the six years since it was founded, it has not proved to be profitable. It was also not that successful on mobile devices. Facebook, which is the largest social network, continued to be pressured by investors to increase its profits and get more mobile users.
Once the Yahoo/Tumblr deal is approved, Mayer will have to manage the takeover. Yahoo has the reputation of paying big amounts of money for start-ups and mismanaging them after. Previous Yahoo acquisitions in the past are Flickr for $35 million and GeoCities for $.6 million. Yahoo acquisitions have either been shut down or neglected by the company.
Mayer will also be pressured to keep the workers from Tumblr, including the company’s founder David Karp. It is still unclear whether Tumblr’s workers will be absorbed by Yahoo.