Yahoo: $1.1 Billion Tumblr Buyout Blunder?

Yahoo (NASDAQ:YHOO) is buying Tumblr for $1.1 billion, according to The Wall Street Journal. So let's get this straight: On one side of the table we have a big, aging Internet media company that needs to boost profits. On the other side of the table we have a blogging platform that has generate tiny revenues — and no profits. So how exactly will Tumblr boost Yahoo's fortunes? Hmmm…

Frankly, The VAR Guy doesn't have an answer. Consider the stark reality:

So Yahoo is buying its way into a crowded market to acquire a business that has no profits. Sounds like a disaster.

But The Wall Street Journal sees some potential upside, noting: "New York-based Tumblr, founded in 2007, has 175 employees, more than 108 million blogs and, according to comScore Inc., SCOR +3.85% had nearly 117 million unique users world-wide in March. That is up from around 58 million a year ago. The site is among a number of fast-growing startups, including online scrapbook Pinterest and news aggregation site Reddit…Tumblr lowered the bar for online publishing and effectively merged blogging with social media."

Impressive.

But here's the bottom line: The Journal reported that Tumblr had revenue of $13 million last year. Now, Yahoo apparently is buying the company for $1.1 billion. Does Yahoo CEO Marissa Mayer know something about Tumblr that the rest of us don't? Hmmm…

Updated May 20, 2013, 8:11am ET: Several reports now suggest that Tumblr's revenue this year will be about $100 million… Is that good enough to make Wall Street applaud this deal? U.S. markets open soon…