Yahoo surprised investors in its recent Q3 2014 earnings call when CEO Marissa Mayer revealed that Tumblr is expected to make $100 million in revenue in 2015, and it will achieve positive earnings before interest, tax and depreciation next year. Much of that is due to the successful advertising (in the form of native content) that has been running on the platform, along with a healthy 40% increase to 420 million users. Now with the release of its first video ads, Tumblr is well on its way to becoming an ad generating juggernaut for Yahoo.
Yesterday, Tumblr rolled out the first of its video ads from a select group of brands, including CW, Lexus, Universal, JCPenney, Hulu. Much like Facebook, the ads play automatically without sound, unless you click to view them.
Advertisers will pay for Tumblr’s video ads on a per-view basis. But since the ads will play automatically, Tumblr will only charge an advertiser once its ad has been played in view for at least two seconds, in compliance with industry standards. Advertisers will not have to pay for subsequent looping views or any views from users sharing, or “reblogging,” the brand’s video with others on Tumblr.
And in case you were wondering about targeting and analytics, Tumblr will offer targeting based on gender, location and interests, providing stats not just on views, but un-mutes, video pop-outs, and viewed length.
For all its criticism, Yahoo deserves credit for turning Tumblr into an ad revenue generator so quickly. Although Tumblr has its own brand-consulting unit, Yahoo is responsible for building out much of the back end that allows brands to programmatically buy ad space on the platform. Keep in mind most of Yahoo’s ad revenues still come from search, and its display ads performed below par in its Q3 earnings report. Now that Tumblr is gaining a significant foothold among big brand names, it looks like Yahoo could start competing with the ad rates commanded by Facebook and Instagram. And you can bet that YouTube, with its archaic pre-roll ads, will be watching closely as (yet another) shiny new format challenges its dominant share of video revenues.