Another year, another blockbuster tech acquisition. Yahoo! has announced that it is buying microblogging site Tumblr. The deal is worth $1.1 billion in cash and gives the aging internet giant an instant infusion of young, dedicated social network users.
But there’s a catch: Tumblr isn’t really making any money, so Yahoo! would need to figure out a way to monetize the site. The proven way, so far, for a social networking site to generate revenue has been selling ads. And that’s exactly what Yahoo! plans to do with Tumblr. But the question lingers on whether the move would turn off long-time Tumblr users. Last year, Facebook bought the photo-sharing site Instagram for $1 billion and has yet to sell ads on the site, worried about alienating users. And Google has been cautious with placing ads on YouTube, the video-sharing site it bought years ago.
Amir Efrati, staff reporter at the Wall Street Journal