The Wall Street Journal is now reporting that the rumored $1.1 billion cash acquisition deal for social blogging site Tumblr has been approved by Yahoo’s board of directors. The Tumblr acquisition was rumored last week, with a price tag reportedly north of $1 billion, which appears to be accurate if the WSJ’s sources are correct.
Tumblr would continue to be run as a separate business and independent property, the WSJ’s sources said, and we could see an official announcement as soon as Monday from one or both of the companies. Yahoo CEO Marissa Mayer become interested in the site only a couple months ago, but sees the Tumblr purchase as a way to big inroads into social media and boost revenue growth, according to one of the anonymous people who spoke to the WSJ. Yahoo already has an event scheduled for Monday in NYC, and the WSJ has learned it will deal with Flickr, something which we’ve also heard separately. The Tumblr deal might not have been on the docket initially, but if it’s all approved it’s highly likely we’ll see it mentioned tomorrow, too.
Recently, we’ve seen suggestions that there’s a vacuum developing at the top of Yahoo’s executive ladder, and there have been rumors recently of key people departing from the mobile team. It’s interesting that a lot of these departures are fairly recent, and could go some way to explaining why Tumblr may have been willing to accept the $1.1 billion offer when sources have told TechCrunch that the amount was seen as “too low” by some within the company. Our sources also suggested that Tumblr may be looking at a fast-depleting cash pile, which again gives it good reason to sell.
Some users on Twitter are threatening to depart Tumblr if the Yahoo deal goes through, as Ingrid reported on Saturday. Overall, as she noted, visitor growth to the site appears to be flat or declining slightly in 2013, so combined, those two facts might not bode well for Tumblr’s future user acquisition. But Instagram also faced an outcry of vocal users claiming they were going to shut down their accounts and depart the service for good when Facebook bought that company. In fact, users, engagement and reach for brands using Instagram have all gone up considerably since the acquisition.
Yahoo has been snapping up companies at a rapid pace this year, with what seems like new acquisitions every week over the past few months. One of the more high-profile purchases was the Summly buy, which brought the news summary startup into the Yahoo fold for a reported price of around $30 million. The company’s 17-year old founder arguably made more headlines than the company itself, and many debated the merits of the acquisition.
More recently, the companies on Yahoo’s shopping list have been more under the radar, and in general the pattern looks like a strategic hiring spree, rather than a bunch of additions to Yahoo’s product portfolio. Tumblr would likely buck this trend, as it has a massive built-in audience, a full-featured, mature product and targets a relatively young demographic that so far isn’t all that well-represented at Yahoo. There’s a certain amount of “cool” that’s attached to Tumblr, and Yahoo is desperate for exactly that.
The deal size is raising some eyebrows, since, as Fortune’s Dan Primack tweeted, Yahoo had only $1.2 billion cash on hand as of its most recent quarterly earnings, which makes an all-cash offer for Tumblr a lot more of a stretch than it would be for someone like Apple, or even Facebook, which acquired Instagram for $1 billion in a mix of both cash and stock. Yahoo’s purchase of Tumblr, if the terms are correct, is a strong indicator of just how badly it wants to expand into media-based social networking.
We’ve contacted both Yahoo and Tumblr for comment, and so far have only received a boilerplate “We don’t comment on rumors or speculation” from Yahoo. If Tumblr gets back to us, we’ll update this piece.