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It’s Official: Yahoo to Pay $1.1 Billion for Tumblr

Yahoo promises to 'not screw up' acquisition of blogging website, which will continue to be led by Tumblr CEO Karp

Yahoo will pay about $1.1 billion, mostly in cash, to buy blogging website Tumblr, the companies announced Monday.

Tumblr will be independently operated as a separate business, led by Tumblr CEO David Karp, the companies said, “per the agreement and our promise not to screw it up.” Deal is expected to close in the second half of 2013.

Yahoo topper Marissa Mayer is banking on the pact to fuel revenue growth: With Tumblr, Yahoo said it expects to grow overall audience by 50% — to more than 1 billion visitors per month — and boost traffic by approximately 20%.

“Tumblr is redefining creative expression online,” Mayer, who joined in July 2012 from Google, said in a prepared statement. “On many levels, Tumblr and Yahoo couldn’t be more different, but, at the same time, they couldn’t be more complementary.”

The deal had been reported to be in the works last week, ahead of Yahoo’s anticipated announcement Monday.

Prior to the official announcement, J.P. Morgan analyst Doug Anmuth said in a research note that the acquisition of Tumblr would be positive for Yahoo because it would bring the company a younger demographic and strengthen its social and mobile presence, which are “all areas in which Yahoo has lagged.”

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But the big sticker price may slow down Yahoo’s pace of share repurchase and there’s a question about the sustainability of blogging platforms generally and the competitive advantage of Tumblr specifically, Stifel analyst Jordan Rohan said in a report. “Tumblr doesn’t solve Yahoo’s strategic issues, which stem from a lack of centrality given its past reliance on email,” Rohan said.

Tumblr has more than 300 million monthly unique visitors, who make 900 posts per second to the site and spent an aggregate of 24 billion minutes on site each month. According to Karp, under Yahoo Tumblr will get “better faster with more resources to draw from.”

“Our team isn’t changing. Our road map isn’t changing,” Karp said in a statement. “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. But we’re elated to have the support of Yahoo and their team who share our dream to make the Internet the ultimate creative canvas.”

New York City-based Tumblr, founded by Karp in 2007, has about 175 employees. The company had raised $125 million from investors including The Chernin Group, Spark Capital, Union Square Ventures, Sequoia Capital, Greylock Partners, Insight Venture Partners, CrunchFund and DFJ Growth.

Yahoo’s Mayer, in a post on Tumblr, tried to reassure Tumblr users that it wouldn’t rock the boat. Her post included an animated GIF featuring the widely memed British World War II “keep calm and carry on” poster.

Mayer’s tweet about the deal was truncated at a less-than-ideal point:

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