While Mr. Karp and Ms. Mayer are adamant that Tumblr will
continue on its own roadmap, they also say that its ad business
will be spurred along with the help of Yahoo's sales organization
-- which is 2,500 people strong, compared to Tumblr's existing 25,
per Ms. Mayer -- and that Yahoo will introduce new native ad
units to the platform.
Tumblr, which is now six years old and has raised $125 million
in funding, pulled in just $13 million in ad revenue last year
after announcing its first foray into advertising in April.
"There was no path or expectation to sell this company,
certainly not this year, and we were well on our way -- I should
say, are on our way -- to making this a self-sustaining business
with our advertising products," Mr. Karp said in an interview
Monday with Ad Age. "The conversation with Yahoo started around
their ability to help us accelerate that business."
The emphasis on advertising would seem to represent an
about-face by Mr. Karp, who told the Los Angeles Times in 2010
that his company was "pretty opposed to advertising" and that it
"really turns our stomachs." Now he's joined forces with a company
that will account for 7.7% of the U.S. display market this year,
according to eMarketer,
though it's been steadily losing ground to Google and Facebook over
the past few years.
Looking back on those statements, Mr. Karp told Ad Age that he
had really been alluding to search ads.
"As we designed our advertising products, we were looking for an
opportunity to empower the most creative advertisers in the
industry," he said. "That's a vision for Yahoo's future and a
vision for advertising that I share with Marissa and our team
shares... Ads on a whole lot of the internet today look like little
blue links trying to get you to buy the thing from you guys rather
than those guys. That wasn't the kind of advertising we were
excited to see on Tumblr."
Ms. Mayer told Ad Age that there's "a great opportunity to
really have Yahoo provide turnkey monetization for Tumblr and they
can decide where it belongs, how it should enhance the user
experience." She added that Yahoo has "amazing personalization and
targeting techniques that we use for both content and advertising
that they can tap into."
"We want the ads overall to be something people take delight
in," she said. "With those tools and with those resources we think
that we can effectively monetize Tumblr while staying really true
to what the community wants and David's vision for where it goes in
the future."
Tumblr's current ad offerings include recently introduced mobile ads
that appear in users' streams. It had previously pitched even more
restrained offerings to marketers and agencies, most notably the
"radar" unit, which rotated promoted blogs and ones curated by
staff on users' dashboards.
On a conference call discussing the deal this morning, Ms. Mayer
alluded to the possibility of Tumblr inventory being sold through
ad exchanges. How Tumblr's user base of 93.1 million unique monthly
visitors, per recent ComScore data, will respond remains to be
seen.
Ms. Mayer also said ads will eventually appear on individual
Tumblr sites, though only "with the blogger's permission." She
declined to comment on how that would be set up and whether it
might entail revenue-sharing agreements.
Mr. Karp indicated that Tumblr might consider YouTube's model,
in which ad revenue is shared with partner channels.
Tumblr was valued at $800 million after its capital raise of $85
million in 2011. Observers have interpreted Yahoo's readiness to
pay a nearly 40% premium on top of that as evidence of Yahoo's
desire to reach the coveted audience of 18-to-24 year olds, for
whom it's not relevant. But Ms. Mayer characterized the deal as a
way to broaden the appeal of Yahoo's content.
"Tumblr is strong in vertical areas where Yahoo has been less
strong. We're very strong in finance, sports and hard news. Tumblr
is great in art and architecture, food and travel, not to mention
fashion," she said. "So we think by pulling in additional strength
in these vertical topic areas, it's something we can do to really
strengthen our core verticals."
Yahoo shares traded at $26.65 Monday afternoon, up 0.49%.