Why Mayer chose Tumblr

FORTUNE — It is only recently that Tumblr started asking itself, “So, how should we make money from this thing?” As of today, that’s a question that Yahoo and its still-new CEO, Marissa Mayer, will have to address. And yet it’s not necessarily the most important aspect of Yahoo’s deal to buy the blogging platform.

It is long-standing practice for Internet-media companies to start thinking seriously about revenues and profits only after raising millions in capital and amassing millions of monthly page views. Tumblr has done that and them some: It has raised $125 million in capital since its 2007 launch and had a reported valuation of $800 million as of last week. Yahoo (YHOO) is paying $1.1 billion in cash for Tumblr, which draws 300 million unique visitors per month and signs up 120,000 new accounts per day. Every second, according to the company, 900 new posts appear on Tumblr blogs.

Those are staggering figures for a company that many people have heard of only peripherally, if at all. In general, the older they are, the more vague is their awareness of Tumblr. And that’s a big part of why Yahoo CEO Marissa Mayer went after it: She wants to shed the well-earned image of Yahoo as a fading Web 1.0 player. Tumblr skews young, and Yahoo needs young. It also needs to strengthen its position in mobile, and Tumblr will help it do that, too. And when it comes to general-interest, ad-supported Internet media, where ad rates are low and falling, volume is the only thing that works.

It’s also in part a talent acquisition. Tumblr founder and CEO David Karp is highly regarded. But it’s possible to make too much out of this aspect of the deal. While Karp is clearly smart and capable, Tumblr (and now, presumably, Yahoo) is looking for someone with more business experience to run the company day to day — someone to fill the role Sheryl Sandberg fills at Facebook (FB).

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The way the Internet and the media have lit up over the acquisition, you’d think it was the Deal of The Century, but it’s far from that. It’s Mayer’s biggest acquisition to date, but it’s hardly an existential risk for Yahoo, which has about $5.4 billion in cash. The company is paying about 11 times projected revenue for Tumblr. That’s high, but it’s not outlandish — it’s slightly more on that basis than Facebook’s current valuation of about 10.3 times revenue. And it carries all kinds of potential benefits that aren’t necessarily easy to quantify: It’s hard to calculate the return on shedding a poor image.

Whether or not Yahoo is able to derive a lot of direct revenue from Tumblr is almost beside the point. At first, it won’t generate much at all. Last year, Tumblr reportedly took in only about $13 million. As Tumblr was building itself, with infusions of capital along the way from a slew of venture firms and angel investors, it eschewed ads, especially display ads. Last year, though, it started getting serious about revenue. For example, it reached a deal with Adidas, giving that company a blog devoted to soccer, the posts of which show up on other bloggers’ “dashboards” (sort of like the news feed on Facebook.) Tumblr has estimated that its revenues will grow to $100 million this year.

But that won’t mean much to Yahoo. Tumblr won’t have much direct impact on Yahoo’s top line until at least 2015, says analyst Mark Mahoney of RBC Capital, who issued a note on the deal Monday morning. The direct return on the investment “won’t be clear for several years,” he wrote, and in the meantime the deal will dilute earnings.

Several analysts compared the acquisition favorably to Google’s 2006 acquisition of YouTube. “It took several years for Google (GOOG) to fully benefit from YouTube’s reach,” notes Ronald Josey of JMP Securities. It’s far from clear what “fully benefit” means exactly, since Google doesn’t break out numbers for YouTube. We do know, however, that YouTube has played a major role in keeping Internet users coming back to Google’s properties, which was the whole idea.

Other pundits have compared the deal to Yahoo’s rather insane, $3.57 billion acquisition of Web-hoster GeoCities in 1999. Yahoo shut that service down 10 years later, having derived very little value from it. There are some similarities — a lot of what gets posted on Tumblr is inane or nasty (or, unlike GeoCities, pornographic), which makes some advertisers nervous, especially the bigger ones. But as Adidas has proved, it’s not necessarily a deal-breaker. Advertisers are slowly getting used to the fact that user-generated content is often garbage, but is nevertheless popular — just like a lot of professionally produced content.

GeoCities, which Tumblr resembles in only the most general sense, was born when the web was still new, and previous Yahoo administrations didn’t know what to do with it as the years unfolded (in that way, GeoCities wasn’t much different from the rest of Yahoo’s assets). Mayer’s acquisition is much less of the moment and much more strategic. That doesn’t mean Tumblr won’t fade out just like GeoCities did, but at least she has a plan for it. Also, adjusted for inflation, Yahoo is paying only one-fifth as much for Tumbler as it paid for GeoCities.

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According to Yahoo, more than half of Tumblr’s users sign on through its mobile app at least part of the time. Yahoo predicts that the deal will increase the company’s total audience by 50%, to more than a billion visitors per month, and will increase total page views by about 20%. Mayer has repeatedly stated that mobile is a cornerstone of her turnaround efforts.

Judging by some media accounts, Tumbler’s users are in revolt. But those reports are based on cherry-picked complaints. Most Tumblr users haven’t said anything at all about the deal, and if Yahoo’s promise to stay hands-off in terms of managing Tumblr holds true, most of them won’t notice or much care.

But the ones who do care, care a lot. “I’ve lost my friends,” wrote Tumblr user “coldplay-kid,” whose musings were cited by Mashable. “I’ve lost my family. I’ve lost the place that I call home. I’ve lost Tumblr.” After that post, and some others declaring that Tumblr is officially over, coldplay-kid posted some more stuff about Coldplay, and life went on.

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