Yahoo’s $1.1 billion proposed acquisition of Tumblr is something of a high-stakes gamble for its CEO Marissa Mayer who is betting big on leveraging Tumblr’s massive user base to boost Yahoo’s bottom line. New York-based Tumblr, founded in 2007, is among a number of fast-growing startups, including online scrapbook Pinterest and news aggregation site Reddit. Tumblr is extremely popular with the highly coveted 18-to-24-year-old demographic and has over 100 million intensely loyal users reading and posting on over 100 million blogs each month. Yahoo hopes that Tumblr’s massive numbers of monthly unique visitors and youthful profile will help turn around its ailing image. Since assuming command of Yahoo in July last year, Mayer has made it clear that she wants to incorporate Yahoo’s products — like Yahoo Mail, Flickr and its popular home page — into the “daily habits” of its users. In order to achieve that goal, Mayer is trying to refocus Yahoo on the “user experience,” which was her specialty at Google, where she played a major role in developing Google’s famously minimalist search-box layout, and would eventually spearhead Google’s most successful products, including Gmail, Google News and Google Maps. Tumblr’s focus on design clearly dovetails with Mayer’s aesthetic sensibility. According to Mayer, buying Tumblr instantly boosts Yahoo’s user base by 50% to one billion, and Web traffic by 20%, “which is really heartening.” “Growth in the consumer tech industry always starts with traffic,” she said. No doubt that Yahoo is paying a hefty premium for the company. When Tumblr last raised money, in late 2011, the $85 million venture-capital investment it received valued the company at $800 million. But all said and done, the $1.1 billion price tag for Tumblr isn’t remarkable for a California-based company – where Instagram sold for $1.1 billion to Facebook and Groupon and Zynga had gigantic initial public offerings – but it’s the largest memorable deal for a New York tech company.
