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There's some big news for Yahoo this week. And with a press conference on Monday, the company has announced a huge acquisition as well as some major updates on Flickr.

According to the Wall Street Journal, Yahoo’s board of directors approved a $1.1 billion cash buy out for Tumblr; the popular blogging platform started by David Karp in 2007.

The news originally broke on the technology blog AllThingsD this past Thursday, and was also confirmed there on Sunday. Tumblr’s board approved the deal on Saturday, and there was a press conference Monday in New York to confirm the acquisition.

This is the largest acquisition by Yahoo in the 10 months that Marissa Mayer has been CEO of the company. It seems to be how Yahoo is approaching to attract a demographic that they’ve been having issues reaching, young people.

The deal definitely has the potential to attract that 18-24 year old demographic. It’s where media obsessed teens and people in their 20-somethings go to spend their time online. Tumblr’s revenue for 2012 was only $13 million, but this buy doesn’t seem to be about the profitability as much as it’s about the user base.

Marissa Mayer, the former Google executive took over as CEO of Yahoo in 2012. She was recently regarded as the 14th most powerful woman in the world by CNN. Since she took over the stock price of Yahoo has seen significant increases going from a mid $15 stock to nearing $28 this month. It comes off as a risky move considering Yahoo is spending a third of its total cash to make this deal happen, but it’s the biggest move made to make them hip again. It makes Yahoo seem desperate to be spending so much, but the reality is that they are desperate.

Is this move a good idea? The Yahoo stock price is up 70% since Mayer took over, which is pretty unprecedented so she’s doing something right. It gives Yahoo the morale boost that its been looking for. Tumblr is really hot and hip right now so it definitely has the potential to help Yahoo’s dying image.

Tumblr has been a pretty big prize for a while now, and it’s not like Yahoo is the only company that’s been vying for them. Facebook and Microsoft has been circling around the idea of buying it too. This sends a message to all those companies that Yahoo is a force to be reckoned with.

Is it possible that Tumblr dies out in some time? Of course there is. There’s no guarantee in anything. There’s always something new. But you can’t avoid taking risk because of it. The upside on this is huge for both companies though.

Goldman Sachs recently upgraded Yahoo to a $30 price point. Now we're not saying that what Goldman Sachs says reigns supreme, but they’re definitely a company that knows what they’re talking about. Even if they’re wrong, people will believe that Yahoo stock is worth more just because Goldman says so.

Something interesting going is direction of Flickr too. Updates to the site  and details on the relaunch of Flickr will be were unveiled Monday at a press conference in New York City, reports CNET. Mayer announced that Flickr users will now have access to 1 TB of free storage and be able to upload full resolution photos-- that's free, high-end Flickr, folks.

With Yahoo as a partner, Tumblr can connect their audience to monetization methods that wouldn’t be available to them otherwise. It doesn’t seem that Tumblr users are happy, but as long as Yahoo doesn’t interfere there shouldn’t be a problem. Let’s see what the future holds for Yahoo. I’d say there’s a bullish forecast. Time to buy.

Editorial update 5/20/2013 15:28 PST to reflect the coverage of the Press Conference.

 

 





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