UPDATE: Yep, it's official.
Guess there will be big news at Yahoo's Monday product event in New York: The Wall Street Journal reports, "The Yahoo board has approved a deal to pay $1.1 billion in cash for the blogging site Tumblr... By acquiring Tumblr, Yahoo would instantly gain a social-media website that has become a hub of communication and blogging for millions of people. Yahoo could help Tumblr generate more revenue from advertisements."
AllThingsD adds, "Sources close to the board said the deal was a foregone conclusion and was an unanimous vote by the Silicon Valley Internet giant... There were no other competing bids, despite reports, to snap up the New York-based hipster blogging service." Yes, because besides starting Tumblrs like "Halloween or Williamsburg," hipsters love to blog porn.
Imagine a company backed by Fred Wilson, one of the top venture capitalists on the Internet. The company is largely reliant on user-generated content and has had difficulties generating revenue in line with its stratospheric valuation. All of a sudden, Yahoo appears and offers a billion-dollar-plus valuation to acquire the company.Another difference is that this Yahoo-Tumblr deal is reportedly all cash (the Facebook-Instagram deal was $1 billion, but $300 million cash and the rest in Facebook stock).
This scenario may be the one many people are considering as rumors swirl that Yahoo is about to acquire New York-based Tumblr for over a billion dollars. But if you were to rewind to an earlier time, let’s say 1999, you’d find that the scenario is exactly the same as it was for Geocities, a company Yahoo acquired for $3.57 billion in stock...
Back in 1999, Geocities had trouble monetizing its audience, slapping low-priced ads all over the site in a desperate attempt to monetize as much of its traffic as it could. Today, Tumblr is just starting to monetize its traffic, with mainstream advertisers still worried about the user-generated content next to which they might appear. To its credit, though, Tumblr has taken a slow and concerted approach to introducing advertising on its properties, carefully tuning their effort to improve response rates.
The timing of the deal is great for those New York hipsters who work at Tumblr: Techcrunch had reported on Friday, "Tumblr employees have been told that the company only has enough funds to operate for a few more months, as its costs far exceed the limited revenue it earns. Tumblr pulled in $13 million in 2012, but has accelerated its advertising offering in hopes of hitting $100 million in revenue this year. The money’s not coming in fast enough to support its expenses though. Employees were recently told not to be concerned, though, because the company is expecting to be bought." And thus David Karp can still sleep without an alarm clock.