Tumblr Struggles With Monetization

Founded by David Karp in New York City in 2007, tumblr is a micro-blogging platform that has re-envisioned the interface of traditional blogging by aggregating posts from different blogs and giving them a fun visual navigation through quick, mixed-media posts. Tumblr has simplified the effort required in sites like WordPress for blog creation and also added features that are not possible in much simpler micro-blogging platforms such as Twitter. Below is a brief overview on this blogging site, which now hosts more blogs than the veteran player, WordPress.

Tumblr’s Growth
Today tumblr lists more than 21.4 million blogs with 6.8 billion posts as of this week. In January of this year, WordPress.com had just under 20 million blogs. To date, tumblr has received over $40.3 million in funding from investors including Spark Capital, Union Square Ventures, and Sequoia Capital.

Tumblr claims that what YouTube did to the video world, it has managed to do for the blogging space by letting bloggers “reblog.” The “reblog” button on a tumblr blog enables a meme to spread across thousands of blogs with a click. Additionally, bloggers have access to enhanced features such as Google Analytics; an easy-to-use, yet sophisticated email publishing to post from desktop or mobile phone to blogs and automatically publish on Facebook and Twitter, to name a few.

The easy user interface and smart features have enabled tumblr’s meteoric rise in uses since the last few years. Last month, tumblr reported 275 million page views in a single day – that was more page views it recorded for all of 2009. The site reports more 7 billion page views a month. Below is a graph from Quantcast representing the site’s growing popularity since 2009, courtesy of TechCrunch.

Tumblr’s Monetization Strategy
But, like many Internet-based companies today, tumblr does not have a strong monetization strategy in place. While most features on the site are free, they also sell premium features to their users. Features such as design themes cost between $9 and $49 each but aren’t estimated to be a significant revenue earner since most money from the sales goes to designers who build these themes.

Very recently, tumblr also gave in to advertising revenues. They are trying out ads and users have the option of hiding the ads. They are also  now charging for recommendations which users can pay for premium listing on the directory.

At the end of last year, the market estimated tumblr’s valuation at $135 million. With high traffic and enormous content, it is a shame to see how, like other Internet players, tumblr has failed to leverage the high potential of the affiliate revenue sharing model. I believe that tumblr should also be evaluating affiliate advertising models to link some of those blogs to actual transactions.