Yahoo's $1.1bn acquisition of blogging firm Tumblr has won the backing of industry pundits who see the merger as a bold move to win over young people.
Shortly after the merger deal was confirmed, analysts weighed in on the billion-dollar deal, which was the largest of Marissa Mayer's term atop Yahoo since she joined the company in the summer of last year.
Greg Sterling, senior analyst and program director with Opus Research, noted that the deal for Tumblr will help to modernise Yahoo by giving the company an instant user base, which may have been more readily associated with market leader Google.
“Yahoo gets billions of page views and a younger user base in Tumblr. It also gets a property that is heavily used on mobile devices,” Sterling told V3. “There is the indirect benefit of getting the Tumblr halo that may boost Yahoo's image with certain users and within the industry.”
The deal will not be without its risks, however. Gartner analyst Allen Weiner noted that the deal could also bring with it a telling sign about how Yahoo will fare in the coming years.
“One has to applaud Marrisa Mayer’s 'go big or go home' move, and the notion that Yahoo’s board is standing behind this purchase with (reportedly) full support,” Weiner said.
“A successful integration of Tumblr into Yahoo’s forward-looking strategy could end a losing streak of purchases and fizzled launches, which includes Maven Networks and Geocities as well as Livestand and Yahoo 360.”
The deal could also have ramifications for the larger market in the social networking space. As Vanessa Barnett, partner at Charles Russell LLP notes, the company is not the first social networking startup to cash in on the current acquisition craze.
“Over the last few months, we have seen a number of things: Facebook share price up, teenagers selling out apps and a number of acquisitions by grown-up technology companies,” Barnett notes. “This is not the beginning of a 'bubble' by any stretch, but it could well be the beginning of something quite exciting.”
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