Yahoo in rumoured $1.1bn bid to buy white-hot Tumblr

Marissa Mayer, the former Google executive who is now in charge of Yahoo, is poised to create yet another nothing-to-riches tale in the web industry with the $1.1bn (£720m) acquisition of the blogging site Tumblr.

Mayer called Yahoo's board together on Sunday afternoon to discuss the firm's latest attempt to regain its former glamour and reports indicated the board had given its approval. Tumblr was founded in 2007 by David Karp, then 21, in a bedroom in his mother's apartment in New York. Within a fortnight it had 75,000 users; by January 2012, there were 42m blogs on the site; today, there are about 110m, and the investors who have poured $125m into the company include Sir Richard Branson.

With a press conference due on Monday in New York's Times Square, just a couple of miles from Tumblr's headquarters, nobody expects Mayer will turn up empty-handed. According to the Wall Street Journal on Sunday evening, the Yahoo board have agreed to pay $1.1bn for Tumblr and will let it continue to operate as an independent business.

Yahoo declined to comment before the announcement, but pointed out that it would be streamed live. That is something the company has previously only done (in audio) for its quarterly financial results. For Yahoo, capturing the white-hot blogging site could catapult it back into the top flight of contenders in a web world that has become hugely more complicated since it was set up in March 1995 – before Google and nearly a decade before Facebook.

Tumblr's attraction is how easily it allows users to create their own web presence: they can go from zero to blogging in less than a minute, posting pictures and text effortlessly. Unlike Facebook, it is anonymous, yet has a powerful search engine for finding "similar" content, which is often reshared. As the network grows, that internal sharing grows and grows.

The web measurement company Quantcast says Tumblr has had 217m global users in the past month, and was the US's 24th most popular site, with about 75m American users. This gives Tumblr a user base on a par with Yahoo's own.

But for Tumblr, Yahoo could bring the ability to attract advertising it has been sorely missing. It also looks like something of a shotgun marriage. Tumblr has only a few months of cash left, according to industry gossip, and has been shopping itself around for a while. It pulled in $13m of advertising in 2012, but is spending far more than that.

Tumblr hoped to hit a $100m revenue target for 2013 but that now seems unlikely, making the purchase a potential lifesaver for investors.

Unlike Facebook, Tumblr has been slow to pull in advertisers. Speaking to the Guardian in January 2012, Karp expressed disdain for how other sites use ads. Of the Google-owned YouTube, he said: "They take your creative works – your film that you poured hours and hours of energy into – and they put ads on top of it. They make it as gross an experience to watch your film as possible. I'm sure it will contribute to Google's bottom line; I'm not sure it will inspire any creators."

Mayer was appointed 10 months ago as Yahoo's chief executive in a move that looked both audaciously clever, and a last throw of the dice. She was at the time one of the longest-serving staff at Google, having been there 13 years, but had apparently been bypassed for the high-profile jobs. Yahoo, meanwhile, had seen its revenues slump and a revolving-door procession of CEOs.

The big fear for Yahoo is that Tumblr will turn out to be an updated version of Geocities, the third most visited site on the internet when Yahoo bought it in January 1999. Though it became famous for users' garish choice of page colours, Geocities was also a resource many loved. But the company arguably never got back the $3.57bn it paid – entirely in stock, at $36 per share. In 2009, Geocities was shut down, and the entire site simply wiped from the internet. For Mayer and Karp, and millions of Tumblr users, the hope must be that history won't repeat itself.