It's official: Yahoo! (NASDAQ: YHOO) is bent on becoming "cool" again. The struggling Internet portal is taking bold steps these days to attract younger users, particularly those between the ages of 18 and 24. Yahoo! CEO Marissa Mayer is now said to be in serious talks with social blogging site Tumblr in what could be an acquisition deal valued near $1 billion, according to a report this week from AllThingsD.
A potential deal between Yahoo! and the social start-up would likely push Yahoo! stock higher from here. The stock currently trades at around $26 a share, with Yahoo! stock having climbed nearly 34% so far this year. Not only would Tumblr lend Yahoo! a much-needed edge in the social media market, but it would also give Yahoo! access to its young and trendy user base. This is important as Yahoo! looks to grow ad revenue.
Yahoo! would reportedly need to cough up $1 billion in the deal, because Tumblr has been raising funding that would likely value the company around the billion-dollar mark. While this would be Yahoo!'s largest acquisition since Mayer took over, the two companies are well matched.
For one thing, gaining a popular social site would give Yahoo! a direct link to the all-important mobile market. In fact, "While its revenue is modest, Tumblr has positioned itself as one of the few players in the digital ad world that is well suited for brand advertising," according to AdWeek.
Additionally, a potential Yahoo!-Tumblr deal would give Yahoo! ammo against rival Internet stocks such as Facebook. In fact, the social network scooped up Instagram last year in a deal that at the time was valued at $1 billion.
To buy or not to buy
While neither company has offered specific details of a possible deal, buying Tumblr could be a real game changer for Yahoo! and its stock. Indeed, Yahoo! seems hungry for an acquisition, particularly after talks fell through with French video service DailyMotion. It's worth watching Yahoo! stock as this story continues to develop.