When Marissa Mayer left Google last year to head-up Yahoo! is its CEO, it seemed likely that one of her main orders of business would be acquisitions. After all, acquisitions are the heart and soul of companies that yearn for noticeable growth, and it's why a day doesn't seem to go by where we don't learn of Yahoo!, Microsoft, Google or other major players snapping up a young company.
So far, Yahoo!'s acquisitions have been rather modest, but that changes now if a rumor proves true. According to some Wall Street Journal sources, a deal could come as soon as tomorrow, with Yahoo! acquiring the ultra-popular blogging platform Tumblr for a cool $1.1 billion. WSJ's sources claim that Yahoo!'s board has already approved the deal, but Tumblr's agreement has yet to be confirmed. If the deal succeeds, Yahoo! would have beat out both Microsoft and Facebook in the hunt for the company.
With a service like Tumblr under its belt, Yahoo!'s social networking presence would suddenly sky-rocket. Launched in 2007, Tumblr makes it easy for users to not only create their own blog, but network with others. As of this past March, the service boasted a staggering 117 million unique users worldwide - up from 58 million at the same point last year. On smartphones, the userbase tripled from 4 to 12 million during the same period.
Despite its popularity, however, Tumblr hasn't yet established a money-making business plan. Last year, the company generated $13 million in revenue, which was thanks to some minor advertising. David Karp, CEO of Tumblr, is pretty opposed to advertising, so it will be interesting to see what happens from this point on as Yahoo! has apparently agreed to let Tumblr operate as an independent business. However, no company spends $1 billion on an acquisition that earns $13 million per year without having a gameplan to change things.
Generating revenue isn't going to be Yahoo!'s only problem, however. According to TechCrunch, there's a high risk of users who would oppose a move to Yahoo! enough to cause them to jump ship and find a new home at a competitor. TC writer Alexia Tsotsis, who's had a Tumblr account since 2009, has stated, "I don’t know exactly why, but my Tumblr is a part of my identity. And for whatever reason, I don’t want to identify with Yahoo." That's harsh, but not an uncommon sentiment, it appears. There's already been a published petition, which at the time of writing has secured 150,000 signatures.
Whew, this could get interesting.
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