UPDATE, 1:27 PM: Yahoo‘s spin machine will be hard at work today and tomorrow trying to persuade investors that CEO Marissa Mayer isn’t wildly overpaying for Tumblr. Although the social media service has become red hot — it averages about 75.8M posts a day — it generated just $12M in revenue last year and hopes for $100M this year, Forbes says. CEO David Karp began to sell ads for the site just a year ago. Yahoo has more than enough cash to make the deal. Still, Mayer could use Wall Street’s support for the biggest acquisition that she has made since taking charge in July. Her company’s shares have appreciated about 33% so far this year because Yahoo’s investments in Chinese e-commerce site Alibaba and Yahoo Japan have been doing so well. Sales of display ads, which have been key for Yahoo, continued to disappoint in Q1. Tumblr, whose average user is under 25, could help Yahoo make more connections with young Web users. But it also could complicate Yahoo’s sales message due to Tumblr’s comparatively lax views about hosting porn, BusinessWeek notes.
The talk about Tumblr could eclipse some additional news Yahoo plans to make tomorrow: It has scheduled a press conference to unveil updates to its Flickr photo-sharing service, Bloomberg reports.
UPDATE 10:55 AM: Yahoo board has greenlighted buying the social network in a billion-dollar-plus deal that could be announced as early as tomorrow, the Wall Street Journal reported today. It says Tumblr will continue to operate as an independent company.
PREVIOUSLY: Yahoo has set a Monday news conference in NY to announce “something special”, and CNBC says that CEO Marissa Mayer will be there. Could the news be that it is acquiring the social network Tumblr? Reports surfaced last night that Yahoo is mulling a deal to buy or invest in the youth-skewing blogging site, and AllThingsD, which broke the news, says Yahoo’s board is meeting tomorrow to consider an all-cash buy for $1.1B. If the deal makes it would be the biggest yet for Mayer as she looks to boost the fortunes of the company, which is still in transformation mode. Yahoo has acquired mostly small startups since she took over last July, and a potential big deal to buy a controlling stake in French video site Dailymotion was scotched by the French government earlier this month. Last month, Yahoo reported declining ad sales for the second fiscal quarter in a row, with revenue from display ads falling 11% year over year, and it reduced its revenue guidance for the current second quarter.