(USA TODAY)Yahoo confirmed Monday it is buying social media blogging site Tumblrfor $1.1 billion and promised "not to screw it up."
The pledge is a direct acknowledgment of the Internet giant's spotty record as a start-up acquirer. But the Tumblr deal, Yahoo estimates, willboost Yahoo's audience 50% to more than 1 billion monthly visitors (about 700 million for Yahoo and 300 million for Tumblr). Just as important, Yahoo is scrambling to regain the hip factor it once enjoyed and to show investors the deal can increase profits and revenue.
Yahoo shares were up 0.7% to about $26.70 Monday, a positive but lukewarm investor reaction.
In a conference call Monday morning, Yahoo CEO Marissa Mayer emphasized Yahoo's pledge to make the deal work by leaving Tumblr alone as an independent operation. To deflect criticism that Yahoo has acquired startups in the past, such as Flickr, that were neglected by top management and added little to Yahoo's revenue, Mayer said she wants the Tumblr deal to resemble Google's acquisition of YouTube and eBay's purchase of PayPal - examples of how keeping acquired companies autonomous can add customers and revenue.
Tumblr "has a great thing going," Mayer said. Yahoo "will operate Tumblr independently. The product road map, their team, their wit and irreverence will all remain the same as will their mission to empower creators to make their best work and get it in front of the audience they deserve."
The Yahoo brand will not be visible on Tumblr for now and the "back-end" integration of some functions will be not noticeable to Tumblr users, Mayer said in Monday's call.
The deal, expected to close before year-end, won't affect Yahoo's financials in 2013. But it will contribute "materially" to the Internet giant's revenue in 2014, the company said. Yahoo said it will pay "substantially all" cash for Tumblr, using proceeds from last year's sale of about half of its stake in Chinese Internet company Alibaba Holdings.
David Karp, the 26-year -old founder of Tumblr, will remain CEO and he wrote online that Tumblr "isn't changing" though many of his users took to social media to protest the deal.
Technology analyst Jonathan Yarmis says in the best of circumstances, acquisitions are hard and that Yahoo has never been in the best of circumstances, "whether it was a dysfunctional board trying to prove it's smarter than the last dysfunctional board. Whether it's a viper's nest of competing fiefdoms. Whether it's a lack of a clear, consistent strategic vision."
"Add all these up and it's no surprise they've had a poor track record," Yarmis added. "They've fixed at least some of these things but even still, this reeks of opportunity meets desperation."
Tumblr's traffic and "compelling content" drove Yahoo to approach Karp, Mayer said. The users of Tumblr, which claims 50 billion blog posts a month, are younger and more tech-savvy than most of Yahoo's users, making it attractive to advertisers.
Since leaving rival Google to take the top job at Yahoo last year, Mayer has been scooping up start-ups, mainly to acquire engineering talent. But the Tumblr acquisition is the largest deal for Yahoo in a decade. Its other major deals include buying GeoCities in 1999 for more than $4 billion and a $1.63 billion deal to acquire search advertising firm Overture in 2003.
The deal most critics site as emblematic of Yahoo's acquisitions missteps is the purchase of photo-sharing site Flickr in 2005, when it was one of the most popular sites for professional and amateur photographers. Yahoo steered resources to other divisions and failed to enhance Flickr's social and mobile features that were needed to compete with Facebook and Instagram. Flickr traffic plummeted.
Under Mayer, Flickr users have begun to notice improvements. Entrepreneur Sean Bonner, who launched #dearmarissamayer - a Twitter campaign to make Flickr "awesome again" - toldWiredmagazine in April that Yahoo has responded to users' pleas.
Flickr photos are now integrated into Yahoo image search results and its iPhone app was overhauled and re-released in December, the report said. "The iOS app is brilliant," Bonner told the magazine. "It's got me and a lot of my friends using our old dormant Flickr accounts again."
Technology analyst Kevin Lee says Yahoo is picking up the type of cool technology that people once associated with Yahoo.
Yahoo envisions incorporating Tumblr's unique posts and other interesting content to Yahoo's flowing newsfeed. "That'll move more people to come to Yahoo," Mayer said.
"Tumblr is "fast and nimble. We want to get the core of Yahoo to move fast," Mayer said. "We can learn a lot from that."
Yahoo may integrate its search engine inside Tumblr, allowing Tumblr's content to appear on the results page on Tumblr and general web queries.
Yahoo plans to sell ads for Tumblr, which has been averse to splashy ads but has started to sell its inventory of content. Yahoo will consider search ads on Tumblr and will talk to bloggers who are interested in selling ads for their blog pages, Mayer said.
In targeting young consumers, top global brand companies -- including all 10 of the largest movie studios -- use Tumblr to promote their products, Mayer said.
Tumblr is also ahead of Yahoo in chasing after customers who use smartphones to access their sites, Mayer said. More than half of Tumblr's users are using the mobile app and conduct an average of seven sessions per day, Mayer said.
Karp wrote that Tumblr's "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. Tumblr gets better faster with more resources to draw from."
At 5 p.m. ET Monday, Yahoo and Tumblr executives will give details of the purchase in New York, where Tumblr is headquartered.