(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.

When Steve Jobs launched iAd last July, the idea was to provide a mobile advertising platform that took its cues more from television advertising than online advertising, which he deemed "irritating." As with all things Apple, iAd only works within the walled garden—selling ads within apps on iOS devices like iPhones, iPads and iPod Touches.

Advertisers would pay a premium, but could expect an advertising experience perfectly built for its environment.

According to information from the research firm IDC, however, the sales strategy that works so well to sell Apple devices hasn't necessarily paid off in the case of Apple's attempt to dominate mobile ad sales.

The Wall Street Journal says:

"But response so far has been tepid: Marketers say they have been turned off by iAd's high price tag as well as Apple's hard-charging sales tactics and its stringent control over the creative process."

Apple Insider's Daniel Eran Dilger, however, points out that the situation may not be as dire as IDC is making it seem. Last year IDC reported that Apple tied with Google for 19 percent of the market for mobile display ads. This year it's down to the no. 3 with only 15 percent share. Millenium Media took the no. 2 spot and Google's AdMob pulled in first thanks in part to more reasonable prices and the act that its device agnostic.

But as Mr. Dilger points out, Apple, which started with just 9 percent of the market of the market in 2009 (launching into mobile advertising with the acquisition of Quattro Wireless after losing a bid on AdMob to Google) has grown significantly and is still ahead of Jumptap, Microsoft, and Yahoo for example. Google, on the other hand, which 27 percent share in 2009 now has 24 percent share.

With iAd, the Journal reports, Apple is making a rare decision to compromise. In July it lowered the minimum commitment from advertisers and it's now making the pricing more flexible, and is even hosting advertisers on campus—a first for Apple, but standard fare for the likes of Google, Yahoo, and Facebook.

Weighing those moves against the poor overall market for mobile ads, Mr. Dilger says

"Apple's share is actually larger than Microsoft and Yahoo combined, making it curious why the Wall Street Journal and IDC worked so hard to portray iAd's $95 million in revenue as a fumbling failure destined for certain death."

Eric Litman - image via BI

With smartphones and tablets breaking away from the pack as the next phase of personal computing, advertising on these devices  is poised to become big business. New York's Medialets, a mobile rich media advertising firms, has been beating Apple on their home turf and capturing dollars from some big brands and publishers. They have now raised a fresh $8.4 million, bringing their total to $18 million.

Peter Kafka broke the news based on an SEC filing. He found previous backers DFJ Gotham and Foundry Group had reinvested, and Medialets CEO Eric Litman confirmed that there were some new investors as well. In that interview he confirmed most of the companies business still revolves around in-app advertising, but Medialets has recently created a self-serve advertising platform and moved into advertising on the mobile web.

Yesterday the big news in mobile advertising was Adobe, which declared an end to Flash for mobile, validating the fiery rhetoric of the late, great Steve Jobs. But Mr. Litman, speaking to Betabeat by phone, said he doesn't think Adobe is going away. "Sometimes in the life cycle of a company, it's more profitable to start again. Flash had already saturated the advertising and creative industries. Now they will be introducing new sets of tools to people working HTML 5, creative people who are hard wired to work with Adobe."

As for Medialets, the new cash will be used to snap up any great engineering talent that comes on the market and to build out their sales staff. So far they have no international business development, although Mr. Litman says they have secured a number of international clients.

Not surprsingly, Mr. Litman is quite bullish on the future. "Mobile is the best medium for advertising created so far. We're getting to the point where so many people have smartphones. That means an advertiser can deliver with context, who you are and where you are, and that is absolutely huge in terms of reaching the right audience."

Every Apple Has Its Thorns

The average user may not have noticed some changes to Apple's UDID, but with iOS 5 the company has closed off a valuable source of information for independent mobile ad networks. "A lot of people are scrambling to find alternatives," says Giancarlo Maniaci, the CEO of TapIt. "The UDID allowed people to track what apps a user had installed and give our clients a sense of how well their campaigns were working. Now Apple is the only one who can offer that."

On the location-based advertising side there were similar complaints. Eli Portnoy, who runs the ThinkNear—a service that helps merchants optimize their flow of customers by serving up location based mobile ads and deals—took note of it on his blog: "“So let me get this straight: mobile publishers on iOS are not allowed to pull location to serve more targeted ads. However, Apple owned iAds is allowed to pull location just to serve ads targeted to a customers location regardless of what the publisher says. To add salt to injury, this feature is turned on by default and buried in the menu system not under ‘Location Services,’ but under ‘System Services,’” Mr. Portnoy wrote. “The FTC really needs to crack down on Apple’s anti-competitive practices.”

It's Apple's prerogative to decide what user data from apps on their platform gets shared with third parties. "It's always been a tug of war in terms of Apple passing any type of user data to ad networks," said Devin Radford, a senior manager at Amobee. "The data on a user's location is very valuable, because the whole point of mobile is to deliver these highly targeted ads."

Location, says Tom Limongello, VP of Marketing at Crisp, is a value-added service in mobile advertising: "It's fair for ad networks to bitch, but they can't argue with Apple for wanting a competitive advantage."

Already some advertisers are considering a switch away from Apple. "If we can't get at the most valuable inventory on iOS, then we'll be moving more into Android and mobile web," TapIt's Mr. Maniaci concluded.

But when it came to the advertising that would be featured in The Daily, the logical choice for ad placement, Apple's iAd, lost out to the New York start-up Medialets, which provides a similar service with a few key differences. Medialets provides the technical platform for publishers and agencies to collaborate on creating rich media advertising, and instead of taking a percentage of the ad revenue for apps — which is Apple's model, to the tune of 40 percent — they get a small ad-serving fee each time the spot is shown.

"As Apple continues to expand its boundaries into the core parts of many publisher's business, there is a growing opportunity for alternatives," says CEO Eric Litman. "From a technical perspective iAd is very compelling, but in terms of business, it just doesn't fit with the way publishers think about the world."

Founded in 2008, Medialets has since signed on over 100 top media players, including The New York Times, WSJ, CondeNast, Hearst, NY Mag and CBS.

"The entire industry was using Flash, and then the iPad came along and didn't support that, so everyone had to scramble to figure out what the best new tool was," says Marc Frons, who runs the technology group at the NY Times. "Medialets has emerged as a new leader."

Medialets shares detailed campaign reports with publishers and agencies, while Apple has increasingly cut publishers off from user data. And because Medialets relies on HTML5, publishers don't have to worry about Apple versus Android verus RIM. "Advertisers don't want to think about devices, they want to think about audiences," says Litman.

These competitive advantages are showing up in the bottom line. Medialets' premium inventory across iPhone, iPad and Android devices increased nearly 300% in fourth quarter of 2010. To keep up, the company has expanded from five original employees in 2008, to 55 today.

bpopper [at] observer.com | @benpopper