Yahoo! Inc. (NASDAQ:YHOO) CEO Marissa Mayer is reported to be making a game-changing acquisition of the social networking site Tumblr Inc for a possible $1 billion.
Earlier today, All Things D reported that the two companies were in serious discussion for a deal. Adweek has now reported that Yahoo! Inc. (NASDAQ:YHOO) is looking for a possible straight-up acquisition.
It is estimated that the deal could be for as high as $1 billion and this might bring the deal under the same league as Facebook Inc (NASDAQ:FB)’s acquisition of Instagram last year.
During this week’s J.P. Morgan’s Global Technology Conference, Yahoo! Inc. (NASDAQ:YHOO) CFO Ken Goldman emphasized the need for the ageing Silicon Valley Internet giant to capture more users from the 18-to-24-years-old-age group.
Tumblr might exactly fit Yahoo’s requirement. The micro blogging platform permits users to post multimedia and other content to a short-form blog, follow other user’s blogs besides make their blogs private.
According to COMSCORE, Inc. (NASDAQ:SCOR), Tumblr has worldwide traffic of 117 million visitors in April. U.S. desktop traffic to Tumblr was 37 million in April, equaling other popular platforms like LinkedIn Corp (NYSE:LNKD) and Twitter.
Yahoo! Inc. (NASDAQ:YHOO) CEO Marissa Mayer has been pursuing a string of acquisitions, including Summly, Astrid, Jybe since her assuming office last year. However Yahoo failed to acquire France’s Dailymotion video service, while it was rumored to be looking at Hulu. Tumblr differs from Dailymotion or Hulu as it focuses heavily on user-generated content, largely text and photos.
Though Tumblr sports modest revenue, it has positioned itself well in the digital ad world that is well suited for brand advertising. Tumblr told Forbes that last year it garnered $13 million revenue, while it is targeting $100 million this year.
The social networking platform Tumblr has been looking to build out an extensive infrastructure quickly. Its drive is accentuated with its sharp consumer growth.
Yahoo! Inc. (NASDAQ:YHOO) CEO Marissa Mayer has been closely watching the fast growth at Tumblr since her days at Google. Since her taking over at Yahoo, she is reported to have met several top executives at Tumblr, including founder and CEO David Karp.
Tumblr has seen a series of funding since 2007. It raised over $125 million so far for a reported valuation of $800 million. Tumblr’s recent initiatives to raise a large funding round might catapult the New York’s value to $1 billion.
The proposed deal with Yahoo! Inc. (NASDAQ:YHOO) could also be just what Tumblr is looking for, with its investors hoping for a big cash out. Yahoo’s huge ad sales team could also rev up Tumblr’s revenues further.