And while Yahoo has managed to grow internationally, it has struggled to make its familiar brand relevant again. Until a recent home page renovation, the company’s main page felt claustrophobic, with ads and content jumbled together.
Tumblr’s trove of users and pages could provide fertile new ground for Yahoo’s advertising operations, with what industry experts say is a bounty of unsold ad inventory. Karp of Tumblr had eschewed advertising in favor of a minimalist approach, only starting to serve users ads last May.
Karp, Tumblr’s chief executive, is expected to get nearly $250 million from the deal. Spark Capital, the Boston-based venture firm, has been involved in five investment rounds of Tumblr’s financing and is expected to make tens of millions of dollars from the deal.
Yet it is not clear how much Tumblr can help Yahoo reach its goals. The blogging site burned through an estimated $25 million in cash last year, and struggled to raise additional money at an acceptable valuation, according to people briefed on the matter who were not authorized to speak publicly about it. That prompted Karp to begin deal discussions with a number of companies, including Facebook, Microsoft and Google, though nothing came of those talks.
Yahoo and Tumblr have been in serious talks since last week, culminating in the Yahoo board’s voting to approve the deal on Sunday morning.
The blogging site has been trying to create new advertising efforts like interactive campaigns, rather than relying on standard clickable ads, with mixed success. Though it has set a revenue target of $100 million for this year, the company reported only $13 million for the first quarter. It reported $13 million in revenue for all of 2012.
Despite its ranking as the 24th-most-viewed website on the Internet, according to Quantcast, Tumblr has yet to translate that into success on mobile devices, something Yahoo strongly wants.
Tumblr also bears a fair amount of unsavory content that may unsettle advertisers. Pornography represents a fraction of content on the site, but not a trivial amount for a site with 100 million blogs.
The search for profits is not unique to Tumblr, as free apps and services struggle to wring money from their users. Instagram famously generated no money when Facebook bought it.
Gillis of BGC said. ‘‘Either this management team is going to turn Yahoo around or be the ones who squandered its asset base.’’
Andrew Ross Sorkin and Jenna Wortham contributed reporting.