Yahoo, Tumblr deal a play for young, mobile users

(CBS News) Internet giant Yahoo announced the acquisition of the blogging site Tumblr on Monday, one day after the Yahoo board approved the $1.1 billion purchase. The Tumblr acquisition is said to be part of Yahoo CEO Marissa Mayer's lofty goal of making Yahoo -- which has a large but aging audience -- a daily visit for all Internet users.

Tumblr, a six-year-old company, boasts over 100 million users and had produced over 100 million blogs, totaling over 50 billion posts to date. CBS News economic analyst Mellody Hobson said Monday that the move adds a younger, quickly-growing, and advertiser-friendly demographic to Yahoo's portfolio.

"She went out and bought herself some 'cool,'" Hobson said of Mayer's decision. "The key issue here is the demographic ... [it's] very, very young, most of the users [are] under the age of 35. That is the demographic advertisers covet because they spend a lot of money. 

"She also bought mobile access because Tumblr has been doing really well with mobile," Hobson added, noting Tumblr's success -- it has outperformed Facebook and Yahoo -- on mobile devices.

Reports: Yahoo to acquire Tumblr
WSJ: Yahoo deal shows power shift

Recent surveys suggest teens -- a critical target for advertisers -- are partial to photo-based social networks like Instagram, Snapchat and Tumblr, over Facebook and Twitter.

Speaking to the potential risk and payoff of the significant acquisition, Hobson explained that all "acquisitions are inherently risky," but the Tumblr purchase could pose unique challenges. Yahoo paid approximately 25 percent above Tumblr's private price and, "the company doesn't make any money, Hobson said on "CBS This Morning." Tumblr generated only $13 million in revenue in 2012.

Still, nearing the end of Mayer's first year at the helm of the tech giant, initial reviews are positive. "So far she's been doing great," Hobson said, "The stock is up 70 percent since she took over last July. By all accounts, she's hitting on all cylinders. 

"She's made it very clear that she's there to win. The company was on its back last year so it's amazing to see how far it's come."

Comments

Follow Us

The Newsroom