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Yahoo in Talks to Acquire Tumblr

Deal for social blogging site could reach $1 billion

Is Marissa Mayer about to make a game-changing acquisition? It appears so.

Yahoo is in serious talks with Tumblr to acquire the social blogging site, according to multiple sources familiar with the talks. The deal is not done, but could reach as high as $1 billion, Adweek has learned. Allthingsd.com was first to report on the talks between the two companies.

Such an acquisition could be just what CEO Mayer has been looking for to turn around Yahoo’s momentum; Tumblr has the potential to excite the engineering/Silicon Valley community (even though it’s based in New York) while recapturing the imagination of advertisers, who have grown to view Yahoo as big but stale.

While its revenue is modest, Tumblr has positioned itself as one of the few players in the digital ad world that is well suited for brand advertising. And Tumblr is also the domain of the young, cool and creative crowd—not currently a Yahoo sweet spot.

From Tumblr’s point of view, the deal also would seem to make a lot of sense. The company has been looking to make a big exit to justify its huge valuation; the company had been rumored to be struggling to raise more funding until recently. "They are looking for a liquidity event," said one source. And Yahoo big ad sales force could help Tumblr ramp up its nascent revenue, while exposing the social networking/blogging behemoth to a wealth of new customers.

“Tumblr is finally starting to really monetize but expectations are very high from the board, particularly newer investors who came in at a very high price,” said a venture capital expert.

Talks are fluid between the two companies, but it’s possible a deal could happen as soon as this weekend, said one source. But it seems clear that Mayer is looking to make a big deal. According to reports, talks recently broke down between Yahoo and Daily Motion due to intervention by the French government. Yahoo is also said to have explored other acquisitions, ranging from Pinterest to Zynga to Media Ocean.

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