Welcome to Davidville! Turbulence at Tumblr Tests Tempers As Start-Up Scales Success
It was the last Thursday of October, and David Karp, the brown-haired, pale blue-eyed 24-year old founder of Tumblr, was chatting with his long-time mentor Fred Seibert, 59, of MTV and other fame, following a parfait and mini-bagel panel on social media at the Bryant Park Grill.
Mr. Karp was merry. He had gotten some laughs during the panel. He was also in the middle of raising $30 million in funding, and it was going exceedingly well. A top-tier West Coast investor once dismissed Tumblr off-hand, the legend goes, encapsulating the Valley’s attitude toward the New York-based start-up with an “Oh, Tumblr? That’s just for Brooklyn hipsters.”
Now that the site’s traffic resembled a very tall hockey stick, it was a different story. Valley VCs jockeyed for meetings and came away bewitched by the high school dropout, a gawky, be-flannelled nerd whose precise brain and total zeal make him singularly persuasive. (“It was the investor-entrepreneur equivalent of love at first sight,” said Roelof Botha, a partner at Sequoia Capital, which funded Google and Apple, among others. Mr. Botha went home after the meeting and wrote a Tumblr post about Mr. Karp titled Inspiration. “He’s a magnetic person,” Mr. Botha said. “I find myself enthralled listening to what he says whenever I’m in a meeting with him.”)
“David, how are you doing?” Mr. Seibert asked. “I think I’m finally letting it get to my head,” his young friend said, with a big, happy smile. “Just remember that within a month you’re going to have to prove to somebody that you’re really worth the money they gave you,” Mr. Seibert said.
He was right. Tumblr signed a term sheet for $20 million with Sequoia Capital on a Friday; on Sunday, a database cluster crashed and the site went dark. “The day Tumblr broke the internet,” President John Maloney recalled, not fondly. The grueling task of getting the site’s 16 million blogs back up fell to lead engineer Matt Hackett and systems director Andrew Terng, who spent the next 40 hours coding and caffeinating. “Don’t read Twitter,” Mr. Karp warned them, as histrionic users were swearing at Tumblr and threatening to shoot themselves.
“Dear Sequoia Capital,” one commenter mocked over on the bilious Tumblr watchdog blog Get Off My Internets. “Please fund me with $25 million U.S. dollars. I will stick some photos of people cats into a scrapbook, with a couple of quotes from Joan Didion and David Foster Wallace and this will have the same effect on the world as Tumblr and also same profits.”
“It was pretty awkward for me,” investor Mr. Botha admitted. “The, excuse my language, ‘oh shit’ board meeting. ‘Oh my goodness, what have I gotten myself into.'”
Frequent Tumblr users weren’t entirely surprised. Tumblr had been serving up slow performance, bugs and intermittent downtime for the better part of a year, mostly due to Mr. Karp’s hesitation about adding engineering staff to support the site’s accelerating popularity. Mr. Karp has always been a frugal CEO who preferred to run his company lean; Tumblr is among the top 50 most popular sites in the U.S. according to Quantcast, which considering its small staff and modest $40 million in funding makes it one of the most efficient properties on the web.
But with just a few staff engineers supplemented by outside consultants, the site was cracking as it grew. Tumblr became synonymous with downtime, inspiring sites like IsTumblrDown.com and WellBeBackShortly.com. In September, power user Zach Inglis abandoned the platform and his 40,000-strong following. His post about it, “Why Tumblr Sucks,” prompting a review of Tumblr’s problems on the programmer discussion forum Hacker News and the following poetic summary: “Love Tumblr, love the community, love the design, but God it feels like it’s tied together with string.”
Things on the company’s backend were just as messy. Mr. Karp repeatedly touted revenue generators that were just around the corner. But it seemed more like the company was rigorously measuring varieties of business model spaghetti and launching them at the wall while simultaneously grinding its skeleton staff to keep up with the explosion of traffic. Business development whiz kid Jared Hecht left in July to co-found a start-up, GroupMe. Early employees Meaghan O’Connell (exeunt January 2011) and Josh Rachford (exuent September 2009) both left their amorphous positions–which included duties such as organizing meet-ups of Tumblr users, fielding phone calls from brands and journalists, and identifying all the porn on Tumblr–for personal reasons.
Tumblr even lost cofounder Marco Arment, who left in September to focus on his already-profitable start-up Instapaper, which at least one investor felt had been consuming an increasing amount of his and the media’s attention. “Tumblr’s technical management needs have evolved to require types of experience that I don’t have, and my independent career has offered a lot of opportunities that I haven’t had the time to take full advantage of,” Mr. Arment blogged at the time.
“It was actually getting really stressful for us in that last year because we were both sort of in over our head,” Mr. Karp admitted.
But good news for the cat video lovers, fashion bloggers, designers, musicians, meme-makers, media workers and 14-year old girls who occupy corners of the Tumblr network: Since it started spending its fresh millions, Tumblr seems to be getting its act together. Uptime for blogs was up to 99.9 percent as of the board meeting two weeks ago. The staff is up to 28 now, nine of whom are engineers. Mr. Hackett is recruiting more technologists to support the design, editorial and community-dominated staff, and having more coders on deck should help the site keep up with its own popularity while continuing to roll out new features. Meanwhile, there are now almost 17.5 million Tumblr blogs; traffic grew six fold in eight months. Britney Spears, the Beastie Boys, The New York Times T Magazine and the U.S. State Department all recently got Tumblrs.
Betabeat visited Tumblr’s spacious, library-quiet loft on the ninth floor of a Flatiron elevator building on a recent Friday afternoon. It’s the office of a mature start-up: Blond receptionist, exposed brick, wood floor. Bottles of wine in the kitchen. Map puzzle on the coffee table, borders complete. Employees silently concentrated on large monitors, only cursorily distracted by the arrival of a reporter.
“We really see Tumblr as a single product to perfect… like the iPod,” Mr. Karp told us after showing Betabeat the five year archive of posts on his personal Tumblr, which he hopes will interest his kids someday. “Rather than ‘we want it to have check-ins and we want to compete with these guys over here and we want to replace like your email.’ Twitter and Facebook went from being beautiful, simple, focused interfaces to being thousand-pixel wide behemoths with multiple navigations and links and promotions and all this stuff. Eventually we’d really like to build like a perfect product, specifically a perfect product for self expression.”
Mr. Karp has a Steve Jobs-esque instinct for product design. But the biggest challenges facing Tumblr are somewhat outside his skill set. The first is scaling, which is almost under control (for now!). The other is figuring out an elegant way to monetize this thing he invented, and soon.
“I would much rather be very much in control of our own destiny rather than raising money in a tech bubble. Financing in a tech bubble can have an effect on the trajectory of a company after a bubble collapses,” he said. “We’re pretty certainly in a bubble and rather than define ourselves against the bubble and its benchmarks I would much rather be defined for our own success… rather than ‘look how fast we’re growing’ or ‘look at how much all this stuff being valued at, we’re a multi-billion dollar company,’ all of that stuff which its possible in this market.”
He paused. “I know very little about all this stuff, by the way. This is literally what I’ve culled just from me being very nervous and asking lots of questions and trying to understand it better.”
He hopes to be making money this year. Tumblr recently launched a directory where bloggers could pay for listings. The $5 slots sold out too fast, so the company pulled the feature and plans to relaunch it soon with more categories and a bidded marketplace.
“David’s maturing as a leader and as a CEO, and the speed at which he has matured as a leader and a business leader is something that I don’t think has been remarked on,” said Mr. Karp’s longtime mentor Mr. Seibert, who invested early in Tumblr. “At least from my perspective of seeing a guy that didn’t really know how to answer to adults five years ago to being the leader of a company that’s valued at multi-multi-millions of dollars, and to handle that with the ease and aplomb that he has is really, really amazing.
“I was not looking for a fast return on my investment,” he said. “In the world of creating the media of the future it’s sort of foolish to think that tomorrow you’re going to get your money back. I did it because I believed in David… I did it with the full expectation that I could lose it all.
“By the way, there’s still a lot of me that has an expectation that I could lose it all. It’d be stupid not to think that way.”