Yahoo board approves $1.1bn deal for Tumblr

Yahoo is set to acquire blogging service Tumblr in a $1.1bn deal, with an official announcement expected today

Yahoo is set to acquire blogging service Tumblr in a $1.1bn deal, with an official announcement expected later today, according to US reports.

Yahoo's board has approved the all-cash deal to buy Tumblr, reported the Wall Street Journal, citing people familiar with the matter.

Under the terms of the acquisition, Tumblr will continue to operate as an independent business, the newspaper said.

Tumblr founder and chief executive David Karp is expected to remain in his role.

Analysts said the acquisition will give Yahoo a thriving social-networking and communications hub and access to younger users as the company battles to regain market share from Google and Facebook.

Specifically, the acquisition will enable Yahoo to compete directly with Google’s popular Blogspot service.

Yahoo appears to be willing to pay a premium for Tumblr as the company was valued at just $800m when it last raised money from private investors.

Despite the company’s fast-growing user base it has struggled to make money because of its limited use of advertising, making just $13m in ad revenues in 2012, according to a report by Forbes magazine.

The acquisition will be the largest in a series of acquisitions the company has made since Marissa Mayer was appointed chief executive in July 2012.

Since taking the helm, Mayer has overseen several product revamps and smaller acquisitions as part of her plan to turn Yahoo’s fortunes around, including an overhaul of products such as Yahoo Mail with new versions of the mail service for smartphones and tablets.

The revamp was widely seen as an attempt by Yahoo to ensure that Yahoo Mail stays popular with the younger generation of users by making its web mail service available across all major mobile platforms.

On taking over the role of CEO, Mayer said her top priority was to create a coherent mobile strategy to reverse years of declining key display advertising revenue.

In February, Yahoo announced plans to update its homepage for the first time in four years as part of efforts to win back users from rival Google and boost falling advertising revenues.

In March, Yahoo acquired news summary app Summly created by a UK teenager Nick D'Aloisio for £18m, which will be rolled into mobile products at Yahoo.

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