Two years ago this week, I wrote a post called What Will Twitter Do With $100 Million? They had just raised a fresh $100 million in funding and I predicted that they would start making a bunch of acquisitions; which they did. At the time I foolishly believed @ev when he said they weren’t going to develop a revenue model based on advertising. Obviously @ev believed it too.
It was just announced that Tumblr has raised an additional $85 million, bringing their total to $125 million. So my question again is what are they going to do with it? I already gave 3 suggestion: search, analytics and spam control. I still think these are the right 3 things the question becomes, what is their business model going to be and how are they going to get there?
This is the part of the blog that I get to play armchair business strategist, because it’s a fun mental exercise not because it means anything.
I’ve been using Tumblr now for the last 3 months as my primary method of posting status updates and short thoughts to Twitter. Much of what I’ll be talking about and the data I’ll be sharing later come from my personal use. I don’t know what “typical” Tumblr use looks like and I don’t pretend to be that but since Tumblr doesn’t share any of that I can only go with my own experience. Which as a phenomenologist, is good enough for me. If your experience differs I’d invite you to share.
Tumblr’s Business Model: The Future is Advertising.
Tumblr and Twitter have a lot of differences but they also have a lot of similarities. They both have rich communities that love to share and they both started without advertising. Tumblr currently makes some money off selling premium themes, but it’s unclear how much money they really make off this. I imagine it’s not that much better that their tshirt sales, and I feel very confident in saying that it won’t make them profitable.
Tumblr also lends itself to a media model even more so than Twitter does. With embedded media, music, video and images it’s already attracted some really big artists to the platform. I feel confident (bat sad) in saying that Tumblr will get the majority of it’s revenue from advertising and branded partnerships. The question then is how do they get there?
How Does Tumblr Reach Scale and Profitability?
Like Twitter, Tumblr has an open API’s but from what I can tell, Twitter’s API is much more robust. Tumblr hasn’t attracted the same level of 3rd party developer ecosystem. This is important because it means Tumblr doesn’t have the breadth of choices that Twitter had for acquisitions. This doesn’t rule out acquisitions it just means that they will be talent acquisitions, complimentary acquisitions (not tied to the core functionality of the service) or acquisitions that allow Tumblr to pivot in a certain direction.
Because of this I think Tumblr will make a few acquisitions but I think they’ll focus on building their own capabilities.
Search, Analytics & More Control
So now we come back to my 3 things:
Search is obvious. The first meaningful acquisition Twitter made was buying Summize, which became search.twitter.com which drives a massive volume of use and eyeballs for Twitter. I said before that Tumblr’s search is horrid, and by horrid I mean the worst in the industry. If they want to become really useful to brands they need to add this functionality. It’s the backbone of all further monitoring capabilities that brands are going to insist on.
Analytics is the big one. In fact I think it’s more important to Tumblr than it is to Twitter. For one thing Tumblr is a more immersive experience than Twitter is. Twitter tends to send people to other sites to read the news, Tumblr encourages a lot more quoting from articles because it doesn’t have a character limit and reblogging and liking posts is a lot easier. Because of this traditional web metrics fall apart on Tumblr, even more so than they do on Twitter. Here’s an example of what I mean: What constitutes a ‘top post’ on Tumblr?
With most of my blogs traffic to a post is the primary metric, comments, and engagement like shares on Twitter, Facebook and other sites tend to correlate with traffic. This isn’t the case on Tumblr. Here are my top 5 posts according to Google Analytics:
- Laughing at the #Americanisms trend.
- This is why Mac users don’t complain about the constraints of the Apple environment.
- To all my UK friends who asked why I owned a gun…
- Bored People Quit
- One of the things you learn as a college president…
Now here are my top 5 posts according to Tumblr ‘notes’ which is number of times the post was reblogged or liked.
- I will be buying these for work. #Nerf #Warfare
- Baidu Continues to Copy Everything About Google, Including It’s Competitors.
- BYOT (Bring Your Own Tech) keeps gaining ground in the workforce
- The Man Who Predicted This Crash
- HTC CEO on Mobile Patent Wars
Not only was there no overlap in the top 5 of either side, there wasn’t any overlap in the top 10 of either side. I fact my top 4 traffic posts didn’t receive any likes or reblogs. The 5th one did but it wasn’t my post to begin with, it was a reblog of someone else. With the exception of my 5th post on traffic I am only including posts I was the originator of because if I reblog a post by a popular Tumblr I see all that posts ‘notes’ and there is no way to distinguish which reblogs or likes are attributed to me and my community instead of theirs or their other followers. It’s great to tell the popularity of a piece of content but not the performance of a particular account.
So as a marketer I can use follower count, replies and retweets as KPI’s for things like traffic, views and conversion this doesn’t work on Tumblr. While on Twitter brands can approximate views and reach based on these KPI’s they don’t translate well for Tumblr. Because Tumblr’s view content in their dashboard a piece of content can have thousands of views without ever registering and traffic to the post. Because of this even their own metrics of X million numbers of page views is meaningless because it isn’t representative of the number of people who saw the content.
This is only important because it’s important for advertisers. As a user I don’t care. Okay I do care because I like metrics but it doesn’t effect whether I use the service or not. I don’t have a business goal I’m trying to achieve. Brands do and they’ll require better analytics to tell if Tumblr is driving real ROI.
Finally, more control is needed. While I expressed this specifically about the spam problem on Tumblr it’s true of all aspect of Tumblr. Right now a lot of the metrics I shared with you are meaningless because of spam. Brands will also need strong third party or native tools for managing an account across a team. There is already a lot of control on the branding of a site which is a good thing but brands are going to want more control and I think Tumblr is going to need to decide if they take a Facebook approach and limit the functionality to specific parameters or if they try and support a wide variety of asks.
What do you think? Do you even care about Tumblr? Do you think it’s got a viable space in the social media landscape?