Yahoo CEO Mayer pledges to get it right on $1.1bn Tumblr buy out
YAHOO boss Marissa Mayer promised "not to screw things up" after her company agreed to pay $1.1bn (€780m) for the blogging site Tumblr.
Confirming a deal that had been rumoured for weeks, Yahoo said it would take over the site that has soared in popularity since it was set up six years ago.
In an effort to placate Tumblr users, who have already let rip over their worries that the site might be over commercialised by Yahoo, Ms Mayer made clear the business will be run as a standalone entity.
"Per the agreement and our promise not to screw it up, Tumblr will be independently operated as a separate business," Yahoo said in a statement.
At $1.1bn, market watchers said Yahoo had probably overpaid for Tumblr, but emphasised it gives the company a way into social media that it has struggled to master on its own.
Tumblr is one of the most popular blogging sites on the web, and has become especially popular as it is geared to the easy uploading of photos and video. However it has little in the way of revenue and it may be years before the business contributes to Yahoo's bottom line.
RBC Capital Markets analyst Mark Mahaney called it a "long-shot/long-term investment" but one that fits into Mayer's turnaround strategy.
"Yahoo's fundamentals have been subpar for numerous years, in part because of the company's missing presence in Social and Mobile. Tumblr may help develop that presence," Mahaney said in a note.
Tumblr does not reveal its financial data but it is reported to have had some $13m in revenue last year. That would imply Yahoo paid an astronomical 77 times turnover – an almost unheard of multiple.
Bold as it is, the acquisition fits Ms Mayer's plan to help turn Yahoo around. The company is still profitable but has seen traffic shrink and is under siege from the likes of Google and Facebook.
Yahoo shares fell 0.8pc in New York.