Tumblr is reportedly close to raising a $75 to $100 million round for infrastructure and scaling, prompting many jokes about bubbles and the valuation-to-revenue gap. Tumblr CEO David Karp has said he is adamantly opposed to putting ads on the site, and the company’s revenue streams–custom themes that cost users a one-time fee of $9 to $49 and a $5 directory–haven’t kept up with the sites user growth.
But it seems it’s time for the start-up, now at 49 employees, to get serious about money, given that costs for servers is increasing under the weight of its growing number of blogs–27,499,028!–and traffic. Sources tell Betabeat that Tumblr is scouting for a Dick Costolo-type, a VP of finance or chief revenue officer, to turn the startup’s zillions of pageviews into brazillions of dollars. “Tumblr’s investors say they believe the company’s active user base gives it tremendous potential to make money,” the Wall Street Journal’s Spencer Ante writes, although no one is quite sure how.
“I think there’s magic that happens inside the Tumblr dashboard,” said Jared Hecht, who did biz dev at Tumblr before leaving to co-found the recently acquired startup, GroupMe. “People sit there literally all day long, refreshing their dashboard, consuming more content. I think it’s the greatest, most monetizable component of Tumblr. They have a unique opportunity to monetize with features that their userbase actually will like and interact with. I think subtle and simple value-add features in the dashboard will be monetizable, along community verticals.”
But as several angry posts by fashion industry insiders who have worked closely with Tumblr show, the company has been unable or unwilling to deliver on these kind of dashboard features, even when big brands have offered to pay for them. Tumblr says it’s already “generating meaningful revenue.” CEO David Karp likes to joke with his team that Tumblr could be profitable in a day if it put just one ad on the dashboard. On principle, Mr. Karp opposes throwing ads on a service that gained traction for its pretty, minimalist design.
“Like everyone else, I am amazed at their user growth and engagement,” said a veteran New York techie who asked to remain anonymous. “I think they are becoming one of the big ten sites on the web. But at the same time, the evolution of the product has been painfully slow, especially from the business side. With their backend squared away, there should be a team of product people banging stuff out, like you see with Foursquare. Instead you get these little, incremental changes.”
What Tumblr needs, thinks this opinionated, insightful, but unfortunately unnamed source, is not a number-cruncher, but a product wiz with an eye for monetization. “On the business side there is almost nothing, I mean, paid themes, really? At this point their growth is a problem. I can’t even imagine what their hosting costs must be. Maybe Karp is just too protective of the product, too precious. A CFO doesn’t really make sense to me. What are they going to do, make a spreadsheet of the burn rate? They need product leads who can experiment and find new ways to monetize.”