As part of its ongoing effort to reinvent itself, Yahoo agreed to buy the blogging service Tumblr for about $1.1 billion in cash, The New York Times reports.
If the deal is approved, it would be the biggest yet under the tenure of Yahoo CEO Marissa Mayer and a major move into social media for the company.
It would also top Facebook’s 2012 acquisition of Instagram for $1 billion.
Founded in 2007, Tumblr has a young, active user base, with over 108 million image-centric blogs. Owning that would expand Yahoo's user base.
Or will it? Analysts and investors are likely to question immediately whether buying a site that has struggled to generate revenue makes any sense.
It is meant to give Yahoo more appeal to young people, and to make up for years of missing out on the revolutions in social networking and mobile devices.
Yet the basic question about Tumblr and other social media sites remains open and is sure to present a challenge to Mayer: Can they make money?
It has not proved that it can be profitable, nor that it can have success on mobile devices, which are rapidly becoming the gateway to the Internet.
Even Facebook and its massive revenue stream face major pressure from investors to show it can increase its profits and adapt to the mobile world.
Mayer will face the challenge of managing the takeover, given Yahoo’s reputation for paying big money for start-ups and then letting the prizes wither.
Previous acquisitions, like Flickr for $35 million and GeoCities - an early pioneer in social networking - for $3.6 billion (!), have done little for Yahoo.
Will Tumblr follow suit? Or be the transformational takeover they hope it will be? Only time will tell, and right now, not even Yahoo knows for certain.