Report: Yahoo! Board Approves Billion-Dollar Tumblr Deal

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Lucas Jackson / REUTERS

Yahoo CEO Marissa Mayer arrives for the TIME 100 gala celebrating the magazine's naming of the most influential people in the world for the past year in New York City on April 23, 2013

Updated May 19, 1 p.m. EST: AllThingsD reports that the Yahoo! board has unanimously approved a deal to purchase Tumblr for $1.1 billion. More updates to follow.

Updated May 17, 8:20 p.m. EST: Yahoo!’s board plans to meet Sunday to decide whether to approve a $1.1 billion all-cash offer for New York-based social blogging platform Tumblr, AllThingsD’s Kara Swisher and Peter Kafka reported late Friday. If approved by Yahoo!’s board, the deal — which could still fall through — will be announced Monday. Earlier Friday, Yahoo! invited reporters to a “product” event in New York City on Monday at 5 p.m.

Original post: Internet icon Yahoo! is in talks to buy New York-based social blogging platform Tumblr for as much as $1 billion, according to multiple reports. At that price, Tumblr would be pretty expensive, given that it reportedly only booked $13 million in revenue last year, but the deal could still make sense for Yahoo! That’s because Tumblr is extremely popular with the 18-to-24 year-old-set, precisely the demographic CEO Marissa Mayer is targeting as she attempts to turn the purple-hued Internet pioneer around following a multi-year slump.

Tumblr has long been considered a major prize, so it’s no surprise that Yahoo! isn’t the only one interested in the company. Tumblr has also reportedly held talks with both Facebook and Microsoft, according to Forbes. Of course, Tumblr CEO David Karp may decide to hold out — he’s reportedly raising a new venture capital round that values the company at $1 billion. Or he may opt for a “strategic investment,” in which Yahoo! or some other big company invests in Tumblr, which would then remain independent. Tumblr has already raised $125 million at an $800 million valuation.

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What Tumblr lacks in revenue, it makes up in “coolness.” The site has become a major destination for young urbanites to post photos, snarky comments, and other ephemera, and then share that content with others. Tumblr is also a very large and fast growing community. It had worldwide traffic of 117 million visitors in April, according to comScore data cited by AllThingsD. Tumblr claims it hosts 107.9 million blogs that have generated 50.7 billion posts.

Taken together, Tumblr’s brand appeal and growth make it an attractive target, especially for Yahoo! CEO Mayer. “If you could pick a company that fits in with what Marissa Mayer has demonstrated in her career — aesthetics, software, technology, and fast-growing — you could not land on a better choice,” one source told AllThingsD.

A Yahoo! spokesperson said the company doesn’t comment on “rumors and speculation,” and a Tumblr spokesperson did not immediately return a request for comment.

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Another reason Tumblr could be attractive to Yahoo! is the frequency with which its users post on the site. Mayer wants to incorporate Yahoo!’s products — including search, email, and its popular homepage — into the “daily habits” of its users, in an echo of the “toothbrush” philosophy espoused by her former boss, Google CEO Larry Page. Yahoo! currently has massive traffic — over 700 million users worldwide — but what it doesn’t have is a social platform. Tumblr could fix that.

Mayer has made no secret that she’s on the lookout for acquisitions. And with over $4 billion in cash, she certainly has the resources to execute a blockbuster deal. In recent months, Yahoo! has reportedly been kicking the tires at Foursquare, Path, Pinterest, and Hulu, according to TechCrunch. “Literally they talk to everyone,” one source told the tech website.

Perhaps more than anything else, buying Tumblr would generate the sort of excitement that Yahoo! needs as it seeks to boost employee morale and position itself as a cool place to work amid an intensely competitive job market for engineers and programmers. Mayer has a long road ahead to complete the Yahoo! turn-around she envisions, but Wall Street likes what it has seen so far. Since assuming command of Yahoo! last July, the company’s stock price has soared by 70%.