November 25, 2017

Tumblr Stumbles Upon A Winning Formula

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“Build It And They Will Come” Who says you can’t build a better mousetrap? Blogging platform with the funny name, Tumblr has attracted millions of users, and convinced investors it’s worth hundreds of millions of dollars.

David Karp - TumblrWall St Journal reports today that: “The New York-based company is poised to raise $75 million to $100 million in venture capital, an investment that will value the company at $800 million, people familiar with the matter said.

The lack of revenue kept some major Silicon Valley venture firms from signing onto the deal. But at least one big firm—Greylock Partners, an investor in Facebook Inc. and Groupon Inc.—is participating, the people said. Greylock declined to comment. Tumblr declined to comment on its discussions with financiers. ”

So, nobody wants to comment on it? Well it doesn’t really matter, as investors are hot to put their money into anything with a Dot Com these days, regardless of earnings. Hoping to catch the next big IPO and cash in, Tumblr looks to have all the “Right Stuff.”

With 45 employees, Tumblr combines blogging and social media. The users can sign up for a free account, choose a name for their public webpage and then post whatever they like.

WSJ goes on to report: “The service has been especially popular with the fashion community, owing to its relative ease of use and visual emphasis. About 20% of the company’s 27 million blogs are related to fashion.

The deal is the latest big investment in a New York start-up since mobile social network Foursquare Labs Inc. raised $50 million in late June, valuing it at $600 million, six times its valuation last year. Foursquare, like Tumblr, has a big and growing user base, but makes little money.

The investment significantly raises Tumblr’s valuation and highlights how interest in promising new technology companies lingers despite growing concerns about the broader economy. In December, Tumblr disclosed that it raised $30 million from Sequoia Capital, Spark Capital and Union Square Ventures in an investment that valued the company at $120 million.

Tumblr’s investors say they believe the company’s active user base gives it tremendous potential to make money. Roelof Botha, a partner with Sequoia Capital and a Tumblr director, said in an interview this May that he is impressed with Tumblr’s growth in users and page views and believes it will find a way to make money from this young, active audience.

But can they make money? “Questions around monetization still exist,” Botha said. “But the company has absolute scale, massive traction, and huge growth and money-making potential.”

But so far it appears that Tumblr’s efforts to generate revenue have been weak at best.

“While our early initiatives are already generating meaningful revenue, there’s much more in store,” founder and Chief Executive David Karp said in an email Thursday. The company’s service is growing quickly overseas as well, he said.

The company has dabbled in advertising, attracting a partnership in February with American Express for New York Fashion Week. Tumblr also has a marketplace for custom webpage themes that range in price from $9 to $49. Revenue from the marketplace, which has more than a thousand designs, is shared with the theme designers.

Wile the unique visitor numbers are impressive, Tumblr had 13.4 million unique U.S. visitors in July 2011, up from 6.7 million users in December, according to industry tracker ComScore Inc. – the page view numbers are staggering,  3.8 billion U.S. page views in July, up from 1.6 billion in December. By comparison, WordPress had 282 million page views, while Blogger had 718 million.

Tumblr was founded in 2007 by Karp, a 20 year old high-school dropout. That’s Cool!

Comments

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