UPDATE: Yahooo! buys Tumblr for $1.1bn

UPDATE: Yahoo! has confirmed that it has purchased social blogging site Tumblr in a deal worth $1.1bn cash.

According to the Wall Street Journal (WSJ), sources close to the matter revealed last night that both Yahoo! and Tumblr’s board of directors approved the sale.

Six-year old Tumblr provides an easy-to-use blogging platform and allows users to follow other blogs in a similar way that users follow each other on Facebook.

ComScore figures show that the site has more than 100m users and a significant mobile presence since being set up by CEO David Karp, then 21, from his bedroom.

Following the deal, Tumblr will continue to operate as a separate business from Yahoo! with Karp expected to remain in his role, said WSJ and later confirmed by Yahoo! and Tumblr. 

Yahoo! said in a statement earlier today: "Per the agreement and our promise not to screw it up, Tumblr will be independently operated as a separate business. David Karp will remain CEO. The product, service and brand will continue to be defined and developed separately with the same Tumblr irreverence, wit, and commitment to empower creators."

The deal is considered a move to bring social-networking capabilities to Yahoo!, an area in which it is currently lagging behind other big internet companies, as well as boost revenue growth. Yahoo! is also seen as attempting to expand its presence on mobile devices with the move, said the report.

However, the acquisition is reported to be a ‘big bet’ for Yahoo! with Tumblr valued at $800m in late 2011. Tumblr has also struggled to monetise the site and has been slow to adopt an advertising model.

Andrew Yates, CEO and co-founder of Artesian Solutions, said of the rumour: “The news that Yahoo! is set to acquire Tumblr reflects the importance of developing a social footprint for the big technology players. Yahoo! is following in the footsteps of smart businesses that have recognised the need to be agile, socially connected and transparent in order to engage today’s internet users.

“However, it remains to be seen whether Yahoo! will capitalise on Tumblr's user growth to deliver a return on investment. As the commercial value of social channels continues to rise, we will see more large vendors look to defend their dominance in the competitor landscape by acquiring young social start-ups.”

In a blog post, research vice president at Gartner Allen Weiner outlined a checklist of Yahoo needs and Tumblr strengths, and predicted that one realistic outcome of the deal will be the creation of content platforms.

He said: "Previous Yahoo execs have always talked about Yahoo’s ‘content buckets’—original, licensed and user generated (i.e. Yahoo Contributor Network) as one of its key strengths, and as a leading vertical content portal for such areas as sports, finance and gossip/celeb news, Tumblr makes sense as a content management-meets-curation platform.

"Such a move would allow consumers, brands and marketers (i.e. content marketing) to curate Yahoo’s syndicated content (original and licensed) and use those pictures, videos and stories to create personal and professional Tumblr pages. Coke and Campbell’s are just two of countless brands that have created Tumblr sites to showcase their wares and tell their stories to consumers. The content platform plan allows Yahoo a few revenue paths including a freemium service option and a venue for targeted advertising. It also allows Yahoo to get even more mileage out of one of its key “cool” brands—Flickr (another e-less product).”

Warwick Business School associate professor John Baptista, who is a digital communication expert, added: "Email is slow and old and dying, so just being an email services provider is not sustainable for Yahoo. Google has had some success with Google+ and this looks like Yahoo is trying to replicate that with Tumblr.

"They are building capabilities to move into more dynamic forms of communication than email to offer Google + functionality to Yahoo! customers.  Tumblr is a very popular platform, but if Yahoo try to impose regulations on it too much to appease advertisers it could quickly drive users away."