Who Said Web 2.0 Was R.I.P.? Microblog Tumblr Raises $4.5 Million, Expectations
by Peter Kafka
Posted on December 11, 2008 at 3:00 AM PT
Tumblr is exactly the kind of start-up that’s supposed to be gasping for air in today’s dismal economy: A trendy but niche Web service with a prominent founder and exactly zero revenue.
Instead, the New York-based company has just raised a $4.5 million Series B round that its CEO, 22-year-old David Karp, says will fund it for two and a half years. Union Square Ventures and Spark Capital, which led the company’s first $750,000 round a year ago, also led this financing. My educated guess is that its investors now value Tumblr at around $15 million.
Tumblr is a “microblog” platform that is supposed to let its users quickly create nice-looking posts with a minimum of effort; it sits somewhere between Twitter and full-fledged blogs like Blogger and TypePad. It is popular with a relatively small but prolific user base: Its 500,000 users have created pages that draw 15 million unique visitors and 61 million page views a month, Karp says.
Money? Nope. Tumblr is free–and has no ads cluttering up its hipster vibe.
Way back in 2007, those kinds of numbers would have been catnip for the likes of Google (GOOG) or Yahoo (YHOO). Now, though, even deep-pocketed buyers aren’t racing to snap up revenue-free start-ups. But Karp says raising money from his previous investors was easy: “These guys came to us with a deal that made us incredibly comfortable.”
Karp says he’s going to start generating money in early 2009. Not by selling ads on his members pages–Karp thinks the site will eventually incorporate ads in some way, but not yet–but by selling users “premium” services, most of which he’s not ready to describe. He does promise they will be “really sexy.”
More practically, Karp points out that other Web services, like the WordPress blogging platform and Yahoo’s Flickr photo service, have been able to upsell many of their users with goodies like extra storage. He figures many of his users will pay up, too.
The new money means he’ll have time to prove his thesis. Karp has just doubled his staff–which means there are now all of six people on payroll. One of them, hired in September, is John Maloney, Karp’s former boss at Urban Baby, where he started his Web career. Maloney is now in charge of business operations.
The money also means there are heightened expectations. Karp has done much more than people twice his age (and has the press clips to prove it). But the newest funding round means his investors think the company will be worth as much as $50 million by the time he sells it or raises more cash. In order to prove them right, he’s got a lot of work ahead of him.
[Image Credit: David's Log]
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Comments
“A lot of work ahead of him.” True that. But the “re-blog” concept that Tumblr uses is brilliant, so brilliant that I started a Tumblr account even though I already have a fully-fledged three-year-old blog on Typepad. Another reason for my duplicity is the design. Elegant, simple, and easy to tweak yourself.
But the blog platforms–or someone independent–MUST find a way to better communicate with each other. It’s too cliquey right now. I’d like to be able to “re-blog” anyone on any blog platform.
Posted by Liz Colville at December 11th, 2008 at 10:34 am“exactly the kind of start-up that’s supposed to be gasping for air”
It’s painfully obvious that you’ve never used the service from the tone and disposition of this post. If you had, I’m almost certain you’d have a different opinion about their financing.
Posted by Eric Kerr at December 11th, 2008 at 4:43 pmEric, either you misread the post or I didn’t do a good job of writing it. The point is that whether or not you or any user likes Tumblr, it’s a revenue-free startup at a time when revenue (and profits) are crucial. So the fact that two major VCs are willing to bet on the company is newsworthy.
Posted by Peter Kafka at December 11th, 2008 at 5:19 pmI’m not discounting the newsworthy-ness of the round of funding; however, saying that they should be “gasping for air” is very sensationalized. I was just disappointed with how condescending the post was with Tumblr’s appeal – the use of “hipster vibe” to counter their desire not to create an ad-infested and shitty product, and wittingly mocking Karp’s promise to keep the service “really sexy”.
The point I’m trying to make is that it sounds like you feel there is little substance to Tumblr as a business. If you had used the product and seen how fanatical its users are, I think you would feel otherwise.
Posted by Eric Kerr at December 11th, 2008 at 6:30 pmBut yes, the real question is whether the fanatical users will pay money for premium features.
I think they took money off the table for allowing custom domains for free, as that would have been a good premium add-on.
Posted by Eric Kerr at December 11th, 2008 at 7:19 pmHas anyone actually checked out tumblr? I am amazed such a thing would obtain funding. I have seen reputable, very useful sites get thrown to the wolves while something so niche and worthless has money thrown in without a thought. This site is a fad, obvious by the name. This might get the whole ‘me too’ thing going but it won’t go the way of facebook in popularity.
Yes it’s easy but that just contributes to how easy it is to create junk and spam. People don’t pay for free things and the second ads are placed on this site its popularity will fall quick. You can’t start a site without ads and add them in later in a 2.0 atmosphere.
Not only do all of the blogs have the same horrible 300px width look but they are all just youtube videos and images I saw on real blogs earlier today. All of the “blogs” on the site are useless tidbits of copy/paste. They may have a lot of visitors, which seem like made up numbers, but the content is a failure. Who will actually stick around and read those blogs? No one will care because none of them will have a real reputation. How many times can we remake the same blog with the same wordpress layout and why would invest money into something that’s just copy/paste?
I’m waiting for the day when google starts lowering your ranking based on it being a 2.0 design or using a standard wordpress layout. There is a good reason why we shouldn’t allow every person in the world their own blog. Most people have nothing valuable to say or just repeat everything they hear like it’s news to you.
Posted by Nathan Quam at December 12th, 2008 at 11:58 ami’m happy for tumblr, let’s see what they do
why is everyone so darn negative all the time?
jealousy?
Posted by Sam Harrison at December 14th, 2008 at 5:10 pm