Yahoo Inc announced on Monday that it would acquire online blogging service Tumblr for $1.1 billion in cash.

So far, this acquisition is the company's largest since Marissa Mayer became the chief executive of the Inter firm in July last year. This deal also marks Yahoo Inc's most expensive acquisition after the company's $1.3 billion acquisition of online search engine Overture nearly a decade ago.

Mayer, who left Google Inc ten months back to lead Yahoo, has been making acquisitions aggressively in a bid to expand the Internet firm's reach and to reverse the company's multi-year decline web traffic and revenues.

In a recent interview, Mayer said, "Tumblr in terms of users and traffic is an immediate growth story for us."

However, analysts are of the view that Yahoo is overpaying for Tumblr, which has never posted a profit. They believe that Tumblr may not make any significant contribution to Yahoo's revenues for years.

Yahoo also announced that Tumblr would be allowed to independently operate as a separate business, even after the completion of the acquisition.

The deal, which will make Tumblr's 26-year-old founder & chief executive David Karp a multimillionaire, is expected to increase Yahoo's audience by nearly 50 per cent.