US TECHNOLOGY major Yahoo splashed out $1.1 billion (£720 million) on acquiring social networking site Tumblr today, reportedly netting 26-year-old founder David Karp a $250m (£164 million) fortune six years after he started it.
The deal, which analysts said was reminiscent of the dotcom boom in the early Noughties, makes New Yorker Karp – who attended high school for only a year – the latest web prodigy to make a fortune from a social media start-up.
Yahoo, led by chief executive Marissa Mayer, said: “Per the agreement and our promise not to screw it up, Tumblr will be independently operated as a separate business. David Karp will remain CEO.”
The move gives the US giant its own social media platform as it seeks to attract younger, more tech-savvy internet users in a bid to match rivals like Facebook and Google.
Tumblr claims to host more than 100 million blogs and 50 billion posts. Analysts said the deal was Mayer’s boldest move since she left Google ten months ago to lead Yahoo’s attempted recovery.
It is Yahoo’s most expensive acquisition since the California-based company bought Overture for $1.3bn a decade ago and will use up 20 per cent of Yahoo’s $5.4bn in cash and marketable securities,
However, analysts warned Yahoo looked to be paying top dollar 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 fitted into Mayer’s turnaround strategy.
“[Yahoo’s] fundamentals have been subpar for numerous years, in part because of the company’s missing presence in social and mobile. Tumblr may help [Yahoo] develop that presence,” Mahaney added.
The networking site is popular with teenagers, and was credited by UK boy band One Direction with being as influential as Twitter and Facebook in their cracking the US market last year.