Yahoo to buy blogging service Tumblr for $1.1 billion

Yahoo Inc has said it is buying blogging service Tumblr for $1.1 billion cash,giving the struggling Internet pioneer a much-needed platform in social media to reach a younger generation of users.

The deal,announced on Monday,is a bold bet by Yahoo chief executive Marissa Mayer to revitalise the company by co-opting a Web property with strong visitor traffic but little revenue.

The acquisition,which will use up about a fifth of Yahoos $5.4 billion in cash and marketable securities,is the largest by far since Mayer took the reins in July with the goal of reversing a long decline in Yahoos business and Web traffic.

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Analysts said Yahoo appeared to be overpaying for a business that might not contribute to revenue for years,but that it had to do something to plug a hole in its social media efforts. RBC Capital Markets analyst Mark Mahaney called it a long-shot/long-term investment but one that fits into Mayers turnaround strategy.

(Yahoos) fundamentals have been subpar for numerous years,in part because of the companys missing presence in Social and Mobile. Tumblr may help (Yahoo) develop that presence, Mahaney said in a note.

Tumblr is one of the Webs most popular hubs of so-called user-generated content. The deal will help Yahoo reach a younger generation of users less tied to traditional Web portal and email services.

The deal is expected to increase Yahoos audience by 50 per cent.