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Yahoo takes big leap with $1.1B deal for Tumblr

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. The Associated Press
Monday, May 20, 2013 - 12:04 pm

SAN FRANCISCO — Yahoo is buying online blogging forum Tumblr for $1.1 billion as CEO Marissa Mayer tries to rejuvenate an Internet icon that had fallen behind the times.

The deal announced Monday is Mayer's boldest move since she left Google 10 months ago to lead Yahoo's latest comeback attempt. It marks Yahoo's most expensive acquisition since the Sunnyvale, Calif., company bought online search engine Overture a decade ago for $1.3 billion in cash and stock.

Yahoo is paying mostly cash for Tumblr, dipping into what remains of a $7.6 billion windfall reaped last year from selling about half of its stake in Chinese Internet company Alibaba Holdings Group. Taking over Tumblr will devour about one-fifth of the $5.4 billion in cash that Yahoo had in its accounts at the end of March.

While hailing Tumblr as a fount of creativity that attracts 300 million visitors each month, Mayer told analysts Monday that she is "making a sincere promise to not screw it up." David Karp, a high school dropout who started Tumblr six years ago, will remain in control of the service in an effort to retain the same "irreverence, wit and commitment to empower creators," Yahoo said.

Karp, 26, may now have a managerial mentor in Mayer, 37. Tumblr, which will remain based in New York, has about 175 employees while Yahoo has 11,300 workers.

Mayer, who worked closely with Google co-founders Larry Page and Sergey Brin during her time at the company, had high praise for Karp during Monday's conference call. "David Karp is one of the most inspiring, insightful entrepreneurs that I have ever met," she said.

In his statement, Karp predicted Yahoo would help Tumblr grow even faster as he strives "to make the Internet the ultimate creative canvas. "

The deal is expected to close during the second half of this year.

Tumblr will now play a pivotal role in Mayer's attempt to reshape Yahoo. To take on the challenge, Mayer ended a highly successful 13-year career at Google, which she helped surpass Yahoo as the Internet's most influential company. Since coming to Yahoo, Mayer has concentrated on improving employee morale, redesigning services and bringing in more engineering talent through a series of small acquisitions that have collectively cost less than $50 million.