When Tumblr was acquired by Yahoo for $1.1 billion nearly a year ago, there was widespread concern among its young user base that old, uncool Yahoo would mess with the platform. True to its word, Yahoo’s done much to stay out of the way and let Tumblr be independent. But that might change if Tumblr’s revenues don’t start showing some growth.
In the New York Times today, Jenna Wortham reports that although Tumblr has doubled its staff, and grown its user base by over 20% in the last year, its revenue generating products have yet to take off in a big way.
So far, Tumblr has gone the native-ads route for its advertising products. This means sponsored accounts from brands that post engaging and entertaining content that would fit in with many of the niche (read: weird) communities on Tumblr. However, Wortham says those ads aren’t quite money-makers yet:
But rather than slap banner ads on those Tumblr blogs and risk a mutiny from users, he said, the company is working with advertisers to encourage them to create their own Tumblr pages and come up with creative material — also known as native advertising — that fans can interact with.
Those branded blogs, however, don’t make money for Tumblr. The goal is to get brands to understand the appeal of Tumblr and then pay for premium placement on Tumblr’s products.
Another problem Tumblr has is the relative anonymity of its users. Social media giants such as Facebook and Twitter are making all their ad money on the strength of their targeting tools. Although Tumblr offers a certain level of targeting, it’s still fairly nebulous, says its former head of media partnerships, Mark Coatney:
He also said Tumblr could be a hard sell to marketers, who like knowing whom they are directing their ads at. This is tricky on Tumblr, because the service does not require people to give more than an email when they sign up for an account. “Real-world identities are valuable to advertisers,” Mr. Coatney said. “Tumblr doesn’t have that.”
If Tumblr has cause for concern about its revenue growth, so should Instagram, which currently offers similiar style native-content-as-ads offerings to its brand partners. There’s only so far a native ad will go on social media. While they are good for building a brand’s image and occasionally delighting viewers with creativity, for the most part there isn’t much of a direct link to sales, something Facebook (and to some extent Twitter) excels at providing.
Eventually, the newer social media platforms will have to figure out a way to introduce e-commerce and user targeting capabilities if they want to generate serious revenue. Instagram has the solid backing of Facebook’s technology to build out those products. For Tumblr, even though its maintained its autonomy, it might not be long before Yahoo lends more than its back-end technology to build out better offerings for marketers.
