Yahoo’s bid to acquire the blogging service Tumblr could be wrapped up as early as this Monday, according to reports at the weekend. Whilst neither Yahoo or Tumblr have made any official announcement, the deal is reportedly a “foregone conclusion”, according to the tech blog All Things D. The news was also confirmed by the Wall Street Journal, which says that Tumblr will continue to operate as a separate business.

The $1.1 billion price tag that’s being reported represents a significant premium over Tumblr’s $800 million valuation, yet Yahoo’s CEO Marissa Mayer clearly believes it’s one that’s worth paying for. By acquiring Tumblr, Yahoo would gain much larger social presence and boost its ability to attract younger audiences as it attempts to counter the influence of rivals like Google and Facebook.

As we explained last week, one of Yahoo’s biggest problems is its image – the majority of its users are older netizens which means that the brand lacks the ‘cool factor’ associated with giants like Facebook and Google. The theory is that the Tumblr acquisition is therefore an attempt to boost its image and make it more appealing to younger demographics, but whether or not that happens is debatable.

Can Yahoo Become Hip Again?

For many years, the Yahoo brand was synonymous with the internet. During the 1990s its name was omnipresent, but over the last decade its seen its lead eroded by Google, while it lacks the buzz of services like Facebook and Twitter.

Yahoo will be hoping to turn its fortunes around on the back of Tumblr, but the odds would appear to be stacked against it. For one thing, Tumblr users are reported to be extremely unhappy about the news, with tech site Mashable.com saying that the takeover has been met with widespread dismay by the community.

Yahoo needs to realize that just because its buying a hip brand, it wont automatically gain the street cred its so desperate for. We only need look at the example of News Corporation, which paid millions to acquire Myspace.com, as an example of how this kind of deal can backfire. Myspace’s popularity took a nose dive just months after that deal was wrapped up, and the site was ultimately sold for a fraction of its original price. Meanwhile, News Corporation is still most definitely not cool.

For now, Tumblr will remain a separate entity, yet Yahoo is surely going to want to integrate the platform into its services at some point. By doing so, the company will be hoping to boost traffic to its other services – we could see heavier integration with the photo sharing site Flickr.com for example. Even so, the $1.1 billion dollar question begs to be asked – can Yahoo actually make money from this acquisition?