Earlier this year, microblogging service Tumblr was the toast of Fashion Week. The company’s fashion director, Rich Tong, negotiated access for influential Tumblr users to cover swanky events. Bloggers got access to A-list fashion shows and in return big brands got access to an online community of fashion enthusiasts that were active on one of the edgier platforms to emerge in the social media landscape in the last few years. And the industry took notice. Now fashion luminaries are on the platform, too. Stefano Gabbana has a Tumblr. So does Terry Richardson.
But Tumblr’s courting of the industry played out a little differently this season against the backdrop of the Fall shows. It began with a proposal Mr. Tong circulated to fashion brands and agencies for the Spring 2012 shows. Tumblr made a similar offer to deliver influential bloggers to big brands, but this time, the company wanted to be paid for the service. The proposal asked for $100,000 to have four of Tumblr’s 20 “select bloggers” produce 15 posts for the client brand’s Tumblr during the week, with the “exact nature of the content to be agreed upon prior to the start of the week.” For $150,000, brands could get ad placement on the official NY Fashion week Tumblr. For $350,000 they could get ad placement on the Tumblr tagged “fashion” page. And for $10,000 big fashion brands could spend a little quality time with the bloggers at a private event. Product placement was also offered “at cost”. “This is an opportunity for your brand to put your product in the hands of the right bloggers,” said the proposal.
For many brands, it seemed like an attractive offer. Tumblr is a popular platform with over 28 million blogs. The company, which was founded by 25-year-old David Karp, has 49 employees and a valuation estimated at $800 million. It’s reportedly close to raising a $75 to $100 million round for additional infrastructure, 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 site’s user growth.
The user growth is in many ways a function of the site’s minimalist and intuitive design, which lends itself to easy reading and sharing of content. “I think there’s magic that happens inside the Tumblr dashboard,” said Jared Hecht, who worked in business development at Tumblr before leaving to co-found the startup GroupMe, recently acquired by Microsoft. “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 wth community verticals.”
But if the platform is attractive to users and potentially monetizable, it hasn’t done a very good job of the latter. Reaction to Mr. Tong’s proposal was mixed. “They clearly don’t understand the first thing about ad buying,” said an agency rep with more than a decade in digital sales who received the proposal. “They didn’t explain how these ads would be served or offer us any way to track them, even through a third party. How am I supposed to present that to a client?”
If Tumblr is having trouble parsing how the industry works, it’s not the only company with that problem. Last week, the New York-based ToVieFor, a members-only auction site for women’s luxury goods, closed up shop after about a year of building the business followed by a spring at TechStars, the high-powered incubation program that connects entrepreneurs with mentors and money. The site was shuttered, the company’s Twitter account was down, its Tumblr was quiet, and co-founder Melanie Moore changed her LinkedIn profile to the past tense. “On the surface, we shut down because we ran out of money,” Ms. Moore said. “However, the root cause of this was a flawed business model. We were attempting to compete solely on price in a world where brands not only do not compete on price, they have essentially formed an oligopoly and set prices (vs. take prices). As a result, it was incredibly difficult to convince brands to allow us to change up their pricing structure. And in retail, having those brand partnerships is critical to survival.”
At the beginning, ToVieFor had incredible momentum. The startup won the $75,000 grand prize at NYU’s Stern School business plan competition, debuted at TechCrunch Disrupt and went on to make the cut into the first TechStars NY class that ended April 15. When they applied for TechStars, ToVieFor had revenue, 5,000 users and a four-person team with 15 years of collective industry experience; they were also filling out their board with fashion insiders, including an editor at Gotham magazine and a finance executive with Burberry.com, according to the New York Times, which reported that “the company’s live presentation, said one judge at Stern’s finals this year, Paul Sciabica, executive director of New York Angels, was ‘investment-bank quality.’”