I'll Tumbl For You

‘Art Project’ No More?: After Six Years, Tumblr Tries to Turn a Profit Through Mobile Advertising

Nobody likes a down round.
tumblr_mj5etkJZCe1r5f1fyo1_1280

(Photo: Tumblr/Davidslog)

Earlier this year, Forbes staff writer Jeff Bercovici wrangled some pertinent numbers from Tumblr–in the midst of touring CEO David Karp’s $1.6 million minimalist loft in Williamsburg. Despite traffic of 18 billion page views per month (as of January), the company ended 2012 with $13 million in revenue.

For context, when Tumblr raised $85 million in 2011, investors valued the company at $800 million. And that financing was going fast. In addition to its swanky Flatiron headquarters, sources told Business Insider that up until the end of last year, the company was burning $4 million to $5 million per month by using third-party servers. Once its own data center went online in October, the cost was reduced to about $2 million per month.

Then there’s the cost of keeping GIFmakers in the ping pong and beer to which they’ve become accustomed.

So how could Tumblr achieve its stated goal of growing revenue to $100 million by the end of this year? The answer to that is the same as it ever was: Ads on ads on ads. Thus Mr. Karp’s disdainful approach to advertising, once permitted or even coddled by investors, has morphed into a more methodical approach.

Last year, the company released its first paid ad products, Radar and Spotlight, as well as metrics on how they were performing–something that’s long frustrated brands on Tumblr.

Now, as Bloomberg reports the company is offering a similar service on smartphones, which they’ve been testing internally. Vice President Derek Gottfrid told the site that the number of people using Tumblr’s app, “has quadrupled over the past six months.” And with the move to mobile, Tumblr has set its sights beyond just growing revenue and toward profitability, for the first time ever.

The average advertising purchase on Tumblr is now “just under six figures,” said Lee Brown, head of sales. “We expect that the monetization will lead us to profitability this year.”

(PR strategist Ryan Holiday also reported that his client, American Apparel, did “six figures worth of buying” on Tumblr in a recent column for Betabeat.)

But despite the new emphasis on ads, Tumblr is eschewing the display or keyword approach for native advertising, same as it has on the web. Says Bloomberg:

Instead, they have to pay to get their own Tumblr blogs seen by more people. They can measure impact by how many viewers republished the post on their own blogs or “hearted” it.

“We’re not bringing them a template or format to complete,” Brown said. “We’re giving them a canvas. That takes a lot of time and a lot of thought.”

That approach has managed to attract big brands like Target, Coca-Cola, Adidas, Lions Gate, and Christian Dior. According to Bloomberg:

The company is trying to convince customers to use its platform as a starting point to create messages that can then be distributed to other social networks, like Facebook, Twitter and Instagram.

“Marketers have become accustomed to buying scale as opposed to earning it,” Brown said. “We’re not really selling ads, we’re promoting their content.”

For Silicon Alley’s sake, here’s hoping going native is as lucrative as everyone hopes. Because monetizing otherkins is a hard sell.

Follow Nitasha Tiku on Twitter or via RSS. ntiku@observer.com