Yahoo wants to buy Tumblr. Will Facebook swoop in at the last minute?

Yahoo chief executive Marissa Mayer thinks that what Blogger did for Google, Tumblr could do for her aging Internet company — make it relevant and a major player on the modern web. And for that she is apparently willing to spend a billion dollars (or perhaps higher) in order to buy the New York-based social publishing and sharing platform.

The news of the pending deal was first reported by AllThingsD and later Adweek reported rumors of their deal as well. At least a couple of our own sources say that the talks are serious. We have also learned that the deal is being championed by CEO Mayer, who according to Kara Swisher, has met with the team from Tumblr. We have learned that Yahoo’s New York-based corporate development team is leading the process, though like all deals, talks could fall apart. (We have reached out to the respective parties for their comments, but so far we have not heard back from them. We are going to update the post to reflect their responses.)

Tumblr says it has nearly 108 million blogs, over 50 billion posts and it is said to have 117 million visitors a month according to comScore. reports that Tumblr made $13 million in 2012 and is looking to bring in about $100 million, thanks to its new advertising initiatives. The company also recently introduced mobile advertising. For Yahoo this could be a much needed foray into mobile advertising and also into pushing new native ad-formats that help diversify its ad business away from the usual web advertising.

Valley calls Karp


David Karp, one of the co-founders and chief executive of Tumblr, has been seen around in Silicon Valley. Tumblr has been trying to raise a new round of funding, but it’s slower than expected revenue ramp has acted as a dampener for the fundraising efforts. Tumblr has raised a total of $125 million and is rumored to be valued at $800 million. Tumblr investors include Union Square Ventures, Spark Capital, Sequoia Capital and Greylock Ventures.

But Yahoo may not be alone in courting Tumblr. In November 2012, my colleague Mathew Ingram argued that Facebook and Tumblr should poke each other. Surprise surprise, it is something that is nagging Yahoo bigwigs.

Facebook in the mix?


We have heard that Yahoo is worried that Facebook (s FB) could swoop in at the last minute and beat it to the buzzer. If the Instagram acquisition was any indication, then we shouldn’t doubt Zuckerberg’s salesmanship. Karp is said to have a close relationship with Facebook and was recently spotted at the Facebook Home launch. Facebook could use the much needed younger 18-to-24 year old demographic, something it (successfully) tried to acquire with Instagram. A Facebook spokesperson declined to comment.

One question is why wouldn’t Google (s GOOG) want Tumblr? After all, it would mean young people on a social network that could feed into Google+ — sort of like how Blogger fed pages into Google. I am guessing given its ownership of Google+ and Blogger, Google might meet some resistance from the Department of Justice. Still, as our sources pointed out, Yahoo knows the challenges in the competitive landscape and is trying to move very fast. The speed would perhaps mean that the company could short circuit the due-diligence process and overlook Tumblr’s challenges with content of questionable provenance.

Money Talks

The good news for Tumblr and its backers: Mayer will soon be super flush with cash. According to a recent Yahoo 10-Q filing, the value of Yahoo’s stake in Alibaba has gone up substantially as Alibaba’s continues to grow its revenues at a healthy clip. Yahoo owns about 23 percent of Alibaba and the Chinese eCommerce company is likely to go public and could worth as much as $100 billion in its post-IPO avatar. Yahoo is expected to sell about half its stake in the Chinese company in the likely 2014 IPO. Wall Street currently values Alibaba at around $70 billion.

In the end the question that remains: is Tumblr the fountain of youth that Yahoo badly needs or will this be a case of a pathetic middle aged guy hanging with youngsters, trying to be hip. Either way, Tumblr founders and backers could laugh all the way to the bank.

PS: Read this teenager’s response to a question on Quora, “How do teenagers waste hours upon hours consuming Tumblr?”