Yahoo's board of directors has approved spending US$1.1 billion in cash to buy popular blogging site Tumblr, according to The Wall Street Journal.
The plan is for Tumblr to operate as an independent business, the Journal reported on Sunday, quoting anonymous sources.
Asked via email about the Journal's report, a Yahoo spokeswoman declined to comment. Tumblr didn't immediately respond to a request for comment.
Tumblr has a solid base of devoted users who are passionate about its creative and community-building power and their fear of the effects of commercialization under Yahoo is palpable, according to Andrew Frank, a Gartner analyst.
"They fear loss of control over the interface, over privacy, and over the freedom of expression in general," Frank said via email.
Thus, for the acquisition to be successful, Yahoo must strike a balance between keeping Tumblr users engaged and delivering a positive return to Yahoo shareholders through advertising. "It will be a daunting challenge which will shed light on the future of both Yahoo and creative social self-expression," Frank said.
Zachary Reiss-Davis, a Forrester Research analyst, also said that a big challenge for Yahoo will be to determine how to boost the revenue of Tumblr, which is currently very light on ads, without ruining the experience for users.
"For this to make sense for Yahoo, it has to keep Tumblr's current active user base passionately engaged and spending time on the site, while also finding a way to add advertising," Reiss-Davis said. "This will be a hard balancing act for Yahoo, given its mediocre record in the past regarding acquisitions."
Yahoo deals that didn't deliver the expected results include the acquisitions of social bookmarking site Delicious, blog social network MyBlogLog and enterprise email vendor Zimbra.
Rumors that Yahoo might be in discussions to buy Tumblr emerged last week, and on Friday Yahoo called for a mystery press event to be held in New York City on Monday afternoon. Tumblr's headquarters are in Manhattan.
"Join us as we share something special," reads the invite, sent to members of the press.
The Journal's All Things D technology news site had reported earlier Friday, citing anonymous sources, that Yahoo might be interested in partnering with, investing in or outright buying Tumblr.
Adweek, in another report also citing unnamed sources, put the value of the deal at $1 billion.
Yahoo CEO Marissa Mayer is expected to be at the New York City event, according to CNBC.
The blogging and social networking site, founded in 2007, has 175 employees and hosts more than 100 million blogs.
Mayer is interested in Tumblr because she believes it can help boost Yahoo's advertising revenue and give Yahoo a bigger presence in the consumer social media market, according to the Journal.
Juan Carlos Perez covers enterprise communication/collaboration suites, operating systems, browsers and general technology breaking news for The IDG News Service. Follow Juan on Twitter at @JuanCPerezIDG.