This would be a really great idea for Yahoo. Their business model is selling ads on content, and the growth of mobile is leaving them behind. Tumblr generates enormous volumes of content and is making the majority of its revenue off mobile advertising already. In addition, Yahoo's demographics skew old, while Tumblr's are much younger.

It's less clear why it would be a good idea for Tumblr, other than being a really great exit for their investors and early staff -- but at the right price, that could be enough, which is probably why the number we're hearing is so large.

The biggest risk for both parties is Yahoo somehow killing Tumblr by starving it of resources (like they did with Flickr, and arguably with Delicious). I think Marissa Mayer is smart enough to learn from that mistake -- she has been pouring resources into Flickr, although it's probably too late to save it.

(Disclosure: I am a former Yahoo)