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05.02.12

Tumblr Open for Ad Business: Allows Paid Placement for $25,000

It’s already raked in $125 million in financing in the last year, and now the blogging site is welcoming advertisers, rolling out a new feature Wednesday that costs $25,000. Just don’t call the paid content ‘an ad.’

Tumblr threw open its doors to advertisers Wednesday, inviting anyone with $25,000 to vie for the attention of the blogging site’s 12 million daily visitors. For that, you can get your message out to President Obama, Beyonce, and the man who puts his dog on things.

The site is allowing brands to buy paid placement on its homepage—a new feature Tumblr is at pains not to call “an ad.” In an example provided by the company, promoted content from the Tumblr blog for The Hunger Games appears prominently on this site’s “Dashboard,” or main interface. If your vision is good enough, you can tell the content has been paid for because a tiny dollar sign surrounded by a halo of light appears nearby.The style of the spots certainly reflects Tumblr founder David Karp’s aversion to conventional advertising, which just last month he called “a last resort.” Tumblr’s enormous popularity stems from its clean, easy-to-use interface, and this new ad model certainly doesn’t interfere. “There are plenty of creative people in the advertising industry who’ve been inhibited by the tools available to them,” Karp told me last month. Whether advertising executives will be galloping down Madison Avenue, energized by the possibilities of this new tool, remains to be seen. Many will relish the opportunity to reach Tumblr’s community, which the site’s founders are framing as an aspirational social network.

Five-year-old Tumblr has raised $125 million in financing, $85 million of which came last fall. In the last year, the site has exploded. There are now 53 million blogs on Tumblr, with a total of about 17 billion global monthly page views. The company has gone from fewer than 20 employees in 2010 to more than 100 now. They are building an editorial product, staffed by veterans of BlackBook and Newsweek, that will cover happenings inside the Tumblr community. Major brands are increasingly establishing a presence on the site, as are celebrities, media outlets, your friends, and their pets. The Tumblr terrarium is vast and increasingly self-contained: you could never leave the site and still live a pretty full creative and commercial life online.

Karp is elusive about whether this move is another in a long line that will eventually lead to an IPO: “It seems like you come out the other side with a lot less control.”

“What’s interesting about Tumblr is they have about 700 million different things they could do” to make money, said Internet entrepreneur Rex Sorgatz. “At this point, it’s probably going to be a bit of an experiment to see which of the two or three they want to do.”

“I don’t think they have to go out there and show they can do half a billion dollars in ad sales,” said Chad Stoller, managing partner at ad firm IPG Media Lab. “What they need to do now is show which parts of the product are monetizable and which parts aren’t.”

Karp said there was no pressure from his investors to start bringing in revenue, but the cold business realities are undeniable. Keeping those servers running and answering the tech-support questions of tens of millions of people costs a lot of money.

It is also impossible to tune out the cacophony of Facebook’s coming IPO, now set for May 18. The social-network goliath, which reaches about 15 percent of the world’s population, took in $1 billion in revenue last quarter, almost all of it from advertising. (Still, some in the agencies are grumbling it is not doing enough.) Now that Tumblr has tiptoed into the space, it will provide an alternative for brands, at least those willing to work within its uncompromising aesthetic.

Karp is elusive about whether this move is another in a long line that will eventually lead to an IPO. “It seems like you come out the other side with a lot less control,” he told me. Still, investors seem happy.

“Whether it has to be public or not, I think you’re going to begin to see a number of creative ways of creating liquidity for early investors,” said Union Square Ventures’ Brad Burnham, an early investor in Tumblr and a member of its board. “We run a 10-year fund. We’ve been investors in Tumblr for five. We’d love to see something happen in the next five years, but beyond that, we’re patient.”