Tumblr's investors said they believe the company's active and growing user base gives it tremendous potential to make money. Like Facebook and Twitter, Tumblr is trying to develop new forms of advertising that work organically within its service rather than running traditional banner ads.
"You will see some experiments later this year and early next year," said Bijan Sabet, a general partner with Spark Capital and Tumblr director. "We believe you can build a successful revenue model against that."
While Tumblr doesn’t feature ads, it is home to many advertiser blogs from companies like IBM. On April Fools’ Day, online eyewear company Warby Parker created some media buzz by starting a Tumblr called Warby Barker featuring dogs wearing hip glasses.
Mr. Coe says the agency's Tumblr commerce platform has two service levels: one designed for small businesses and the other for brands. For the former, Coexist and Stripe would take a roughly 6% cut of sales transacted through the platform, but the service would be free to use. In the case of brands, he's envisioning something more custom where Coexist might develop a Tumblr blog for an event like Fashion Week and then power a pop-up store where Tumblr followers could buy limited-edition goods that had been unveiled that week.
Portland, Ore.-based Coexist Digital has developed a commerce platform for Tumblr that enables users to buy products without ever leaving the page they're on, with transactions enabled by the payments startup Stripe. While individual Tumblr "stores" like Made By Nike have cropped up before -- starting with the November 2010 launch of fashion retailer Of A Kind's Tumblr blog, which is powered by Shopify's shopping-cart technology -- Coexist's commerce platform is the first to aspire to power the back end for a cross-section of brands on Tumblr.
"We just landed on the idea of Tumblr commerce, and the idea of being able to buy from a Tumblr blog was wildly exciting," said Coexist's principal Dan Coe, whose agency is focused on shopping experiences for brands like Bath & Body Works and C.O. Bigelow.
The list of companies with a Tumblr presence includes global brands such as IBM, which has a Tumblr page dedicated to innovation for its corporate Smarter Planet initiative; record labels such as Universal and EMI; and even diaper seller Huggies, which regularly posts photos of celebrity mothers and their babies. However, most branded Tumblrs seem to fall into fashion -- both highbrow, like Alexander McQueen and Oscar de la Renta, and mass market, such as J. Crew and Ann Taylor -- and media categories. Fashion brands usually take advantage of Tumblr's strong visuals by posting looks from their latest collections or catalogs, while media outlets often post easily digestible pieces of content; think cartoons and short poems on The New Yorker's Tumblr and photos, quotes, charts and graphics on NPR's.
Less than two months after announcing its plunge into paid advertising, Tumblr has sold a month-long campaign to a global advertiser: Adidas.
The footwear retailer launched an official soccer Tumblr blog in time for the 2012 UEFA European Championship, being played across Poland and the Ukraine starting today. It plans to promote the site with paid placements in the Tumblr "Radar" slot on the user dashboard, which will continue to feature a continually rotating selection of Tumblr blogs picked by the editorial team, but now can be bought as an ad unit for an entire day as well. Adidas will also promote the site on Tumblr's "spotlight" page for sports blogs, where the ad runs three times wider than the teases for organic picks.
WSJ: How do you think your bloggers will react to Tumblr with ads?
Mr. Karp: Our ambitions are to keep Tumblr true to what it is. And to us, that's a platform for creativity.
We want lots of ways to promote yourself on Tumblr when you've got something great. You can hustle and do it organically, or you can feed a little money into the system to jump start it.
Karp chose not to operate that way. Rather than monetizing clicks, he wants advertisers to view Tumblr as a place to promote particularly creative campaigns to an audience whose attention is worth paying for.
After praising the creative advertising already on Tumblr, Mr. Karp took some not-so-subtle shots at the giants of the space, calling Google and Facebook "devoid of creativity" in designing boxy, often text-heavy ad units. He also noted that there's "no 140 characters, [and] no little box" in Tumblr Radar.
Radar placement gets 120 million impressions per day from users logging into their dashboard across devices, Mr. Karp said. "You've already seen our ad unit," he added.
Tumblr founder David Karp has loosened his hardline "no ads allowed" stance, but the young blog mogul has promised that any ads on Tumblr will be artful and "make you feel something for the brand." So it was a surprise when a fraction of users suddenly started seeing typically spammy-looking banner ads peppered throughout their dashboards.
Karp is fond of saying that Tumblr "could be profitable tomorrow" if it placed just one ad on users' dashboards. But the ads Tumblr users are seeing are crude, and the products they're pushing are small, off-brand services that probably couldn't afford to advertise with Tumblr. The ads are appearing multiple times in users' dashboards, reportedly slowing down the service. Although Tumblr has been experimenting with advertising, this is exactly the kind of advertising the startup has sworn it will never do.
The steep $25,000 price point is no accident; it’s intended to keep out junky ads from un-ideal advertisers. In fact, Tumblr is gating its ad platform and will only be working with select advertisers that understand the opportunity, vice president of product Derek Gottfrid told VentureBeat. “We’ve priced this accordingly to make sure we have a really high quality experience,” Gottrid said.
For the launch of its ad units, Tumblr was looking to work with brands that were already active on the platform and had a strong creative vision, according to Tumblr director of product Danielle Strle, who noted that Adidas already had a compelling presence on Tumblr with its fashion- and design-oriented "Adidas Originals" blog. (When he unveiled the ads at Ad Age's Digital Conference in April, Tumblr founder David Karp placed particular emphasis on the importance of design, adding that "anyone interested in doing anything creative with us" should email him.)
"We've been kind of selective as to who we're engaging with for this opportunity right now," Ms. Strle said. "We're trying to ramp up and do a lot of learning from these initial advertisers."
He seemed particularly enthusiastic, in fact, about advertising. That old quote about it turning his stomach was, he says, imprecise: It’s specifically Web advertising as we know it that he opposes. “The Web has mega-optimized the smallest chunk of advertising, which is direct response,” he continued. And that’s fine for, say, an online electronics retailer. But it doesn’t do much to enable the kind of creative advertising that is “intended to make you feel something for the brand.” That’s what the ad industry was built on, and it’s what people remember, he says: “Can you remember the last Twitter ad you’ve seen, the last Facebook ad?” And so, he concludes, there is a huge, untapped opportunity. Not that he’s interested in competing, you understand; he just has a feeling this is something everyone else has missed.
Karp has said Tumblr could be “wildly profitable” overnight by simply incorporating conventional online ads into the platform, but he believes that would spoil the community and the creativity that have taken shape there. His proposed solution entails advertisers’ being just as creative and expressive as Tumblr users. For now, that means that a spot on the Tumblr dashboard generally used to highlight the company’s picks for the coolest stuff happening in its network will include occasional content from paid sponsors. The first participants included Adidas, Calvin Klein and the movie “Beasts of the Southern Wild,” generating more than $150,000 in revenue within a month.
Tumblr Radar gets more than 120 million daily impressions, which Tumblr says will offer sponsors “the opportunity to gain thousands of new followers, likes and reflags.” Meanwhile, sponsors also have the opportunity to be featured “front-and-center” on Tumblr Spotlight. The Spotlight feature, curated by a team of editors, is a sample of some of the more especially creative blogs on Tumblr and is a driver of “tens of millions of follows each week for new and existing users.”
If Tumblr is a platform for human creativity, Tumblr CEO David Karp says it can also be a platform for creative brands. At Ad Age Digital, Mr. Karp unveiled "Radar," an ad unit coming to the blog network in May. Here's a clip from his keynote:
Five-year-old microblogging platform Tumblr announced its first foray into paid advertising at Ad Age's Digital Conference this afternoon.
Founder and CEO David Karp said Tumblr will start offering the "Radar" post that appears on a Tumblr user's dashboard as an ad unit on May 2. Radar is currently an officially curated selection of images used to highlight notable or popular posts (usually images) from across the network.
WSJ: What's wrong with online ads, in your eyes?
Mr. Karp: The video ads that we're hit with are always in the form of pre-roll, the video reel you get at the front of an online video. So they're delivered at the most frustrating moment possible. And everything else, I think, is strikingly uncreative.
We've seen brands show up and use our tools very creatively. Our promotional tools are built around elevating that stuff up to the top more quickly. We were already promoting a lot of this content.