• by Mark Walsh  @markfwal, May 20, 2013

With its $1.1 billion acquisition of Tumblr, Yahoo on Monday made clear that it plans to allow the blogging service to continue to operate as a separate business and brand. That includes no Yahoo branding on Tumblr. At the same time, the Web portal will look for ways to integrate advertising, search and content management on the back-end to bolster growth across both companies.
 
Maintaining a separateness while benefiting from the complementary strengths Tumblr provides is the balance Yahoo aims to strike. “I see this as a clear way to accelerate Yahoo’s growth in our core businesses,” said the company’s CEO Marissa Mayer during a Monday conference call on the deal.
 
Buying Tumblr is Mayer’s biggest gamble to date in revitalizing the Web portal after snapping up several mobile and other startups since taking the reins last July. For the first time, Yahoo owns a fast-growing social media property to challenge larger rivals like Facebook and Twitter.
 
With its younger demographic and mobile-focused approach, Tumblr also helps Yahoo in other key areas where it’s trying to gain ground. Mayer pointed out that Tumblr brings “great tools” for content creation, which Yahoo can use in connection with the revamp of its home page and other properties.

In that vein, don’t be surprised to see Tumblr posts integrated into Yahoo’s new newsfeed the way it began selectively adding tweets last week. “It’s easy for us to imagine engagement on the core site will improve as we integrate this content,” said Mayer.
 
When it comes to advertising, 6-year-old Tumblr has taken a very gradual approach to monetizing the site under founder and CEO David Karp. It introduced ads only last year, alongside its “dashboard” or feed. In the Spotlight section, it highlights sponsored content. More recently, it has rolled out in-stream ads in its mobile apps, and has begun to do so on the desktop as well.
 
With Yahoo debuting ads recently to its own home page news feed, Mayer suggested Yahoo could help expand the use of in-stream ads in the Tumblr feed, as well as launch any new types of “native” advertising that mirror the surrounding content. She added that Yahoo would also work directly with individual bloggers who want to run advertising.
 
Mayer noted that the top 10 Hollywood studios are already spending to promote films on Tumblr, which would be able to leverage Yahoo’s extensive sales force and advertising relationships to build out its ad business.
 
In relation to search, Mayer indicated the potential to tie into Tumblr’s own site search offering -- spanning 50 billion blog posts -- as well as providing some level of Web search on Tumblr.
 
Agency executives for the most part applauded the Tumblr acquisition, saying it would help Yahoo gain more traction with the coveted 18-34 audience while also increasing engagement via social and mobile platforms. But they also warned of risks -- especially with the amount Yahoo is paying for a company with only $13 million in revenue last year.
 
Vik Kathuria, managing partner, corporate strategy and digital investment at GroupM’s MediaCom, said Yahoo has take a long-term approach with Tumblr. In part, he said that means making sure not to turn off Tumblr’s young-skewing users by flooding them with display ads simply to justify the billion-dollar price tag.
 
Likewise, Bryan Weiner, chairman and CEO of digital agency 360i, said monetizing Tumbler without alienating its users is a balancing act that “Yahoo will need to master in order to prove this move was a worthwhile opportunity for its business trajectory."
 
Indeed, many have pointed to Yahoo’s checkered history with acquisitions as reason for viewing its Tumblr purchase with skepticism. For her part, Mayer pointed to eBay’s acquisition of PayPal and Google’s deal for YouTube as models for the course Yahoo wants to follow with Tumblr.
 
“The best acquisitions like this … do allow the two brands and products and services to evolve somewhat separately,” she said. “While there is obvious ways we’ll integrate the infrastructure on the back-end, we imagine that will be largely invisible to users.”