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Tumblr deal is Marissa Mayer’s first real attempt to make Yahoo hip again

Tumblr Yahoo
Aaron M. Sprecher/AP Images for Tumblr
Will these players—at a Tumblr party during the South by Southwest (SXSW) festival—now heart Yahoo?
Published This article is more than 2 years old.

Yahoo CEO Marissa Mayer has made her first major move to try to make Yahoo cool again. The Wall Street Journal reports that (paywall) Yahoo’s board today approved a $1.1 billion deal to acquire blogging site Tumblr. The deal, first reported by AllThingsD, is meant to attract younger users who see Yahoo as largely irrelevant.

Mayer has made several acquisitions since she came to Yahoo from Google last year, largely focusing on boosting Yahoo’s mobile phone strategy and other areas to make Yahoo hip again. Mayer acquired food and entertainment recommendation app Jybe and news summary app Summly. But these are small deals.

Tumblr is big time.

The site boasts more than 100 million blogs and has been ramping up its mobile phone strategy. The deal represents a win for investors in Tumblr, last valued around $800 million. Union Square Ventures, Greylock Partners and the Chernin Group are among Tumblr’s early backers.  

Yahoo is planning a product-related press conference tomorrow evening in New York City. There’s a good chance Mayer will toast the Tumblr deal in a buzzy unveiling (cocktails have been promised).

After years of CEO changes and missteps that caused Yahoo to fall behind Google and other competitors, Mayer helped buy Yahoo some time to overhaul its strategy. But its last earnings report in April showed that Yahoo still has a ways to go to bring in advertising. Yahoo’s $1.07 billion revenue for the first quarter missed the very modest 2% bump that analysts had expected. Display advertising and search revenue were all down.

The billion-dollar question remains: Tumblr may transform Yahoo’s reputation among hipsters, but will Yahoo still need help on the crucial revenue front?

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