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Yahoo eyes rejuvenation with Tumblr buy

Tumblr chief executive David Karp and Yahoo chief

Tumblr chief executive David Karp and Yahoo chief executive Marissa Mayer during a news conference in Manhattan. (May 20, 2013) Credit: AP

Yahoo is buying online blogging forum Tumblr for $1.1 billion as Yahoo CEO Marissa Mayer tries to rejuvenate her company, an Internet pioneer that had fallen behind the times.

The deal announced Monday is Mayer's boldest move since she left Google 10 months ago to lead Yahoo's latest comeback attempt. It marks Yahoo's most expensive acquisition since the Sunnyvale, Calif., company bought online search engine Overture a decade ago for $1.3 billion in cash and stock.

Yahoo is paying mostly cash for Tumblr, dipping into what remains of a $7.6-billion windfall reaped last year from selling about half of its stake in Chinese Internet company Alibaba Holdings Group. Taking over Tumblr will devour about one-fifth of the $5.4 billion in cash that Yahoo had in its accounts at the end of March.

While hailing Tumblr as a fount of creativity that attracts 300 million visitors each month, Mayer told analysts Monday that she is "making a sincere promise to not screw it up."

David Karp, a high-school dropout who started Tumblr six years ago, will remain in control of the service in an effort to retain the same "irreverence, wit and commitment to empower creators," Yahoo said.

Karp, 26, may now have a managerial mentor in Mayer, 37. Tumblr, which will remain based in New York, has about 175 employees, while Yahoo has 11,300 workers.

Mayer had high praise for Karp during a conference call Monday, calling him "inspiring" and "insightful."

In his statement, Karp predicted Yahoo would help Tumblr grow even faster as he strives "to make the Internet the ultimate creative canvas." The deal is expected to close during the second half of this year.

Karp's cut from the Yahoo deal is about $275 million. Most of the rest of the money will be paid to the venture capitalists that invested about $125 million into Tumblr.

Tumblr will now play a pivotal role in Mayer's attempt to reshape Yahoo. Since coming to Yahoo from Google, Mayer has concentrated on improving employee morale, redesigning services and bringing in more engineering talent through a series of small acquisitions.

Yahoo shares gained 6 cents to $ 26.58 in trading Monday.

About Tumblr

FOUNDED: February 2007 by software consultant David Karp and web developer Marco Arment.

HEADQUARTERS: New York

LEADERSHIP: CEO Karp, 26, owns a 25 percent stake in the company.

EMPLOYEES: 175

FINANCIALS: Tumblr's 2012 revenue was $13 million.

USERS: 54 million worldwide

DAILY POSTS: 70 million MONTHLY PAGE VIEWS: 17.5 billion LANGUAGES: Localized in 12 languages, including Polish, Turkish and Japanese.

BIG MOMENTS: Singer Frank Ocean announced that his first love was a man on his Tumblr blog. Singers Beyoncé and Jay-Z posted the first photos of their new baby on Tumblr.

Sources: Tumblr; Forbes.

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