Tumblr’s challenge: finding money in sparking creativity

For a while there, David Karp, the founder and CEO of microblogging and sharing platform Tumblr was enamored with his start-up’s exploding numbers: 20 billion blog posts, 50 million blogs and more than 120 million users. But after a crazy stretch of growth, including A 900 percent increase in visitors in 2011 ,what excites Karp is getting back to the heart of what he envisioned for the company: empowering creativity.
In a recent conversation, Karp told me that Tumblr is looking to make its mark by enabling creators to express themselves, which he said is something he feels Apple (s aapl), Adobe (s adbe), YouTube (s goog) and others have lost sight of and which break-out hit Pinterest is not enabling in a deep way.
“We are one of the few tech companies that cares about creators. We are not trying to build a network but we’re giving people a way to express themselves . I’m hoping in the next one or two years, we will prove we are company that is bent on helping them do great shit,” Karp said.
The focus on creativity, however, obscures a bigger question hanging over Karp’s head: How Tumblr is going to make money. But in his mind, the two goals converge; if properly executed, Tumblr can make money by making sure it continues to empower and support creators.
Opening the platform to more developers

One way Tumblr wants to become more of a creative platform is to invite more developer support. Tumblr already allows a couple dozen developers to sell templates on its Tumblr’s marketplace but Karp sees a much bigger opportunity to fling open the doors to more developers. The company recently posted a job title for API lead to work with outside developers. Karp said he envisions a big marketplace where developers can sell designs and templates with Tumblr taking a cut similar to what Apple makes in its App Store. Toward that end, Tumblr is working on creating a better set of tools for developers.
That’s an example of how he hopes to bridge the gap between Tumblr’s mission and monetization: keep the company doing what it does best and find ways to make money along the way. For example, he said he obsesses over how to not wreck the uniqueness of Tumblr by pasting generic ads over the top yet still find cash.
One of the money-making moves Tumblr has tried has been to let creators pay $1 to highlight their posts on the Tumblr dashboard. He said that is a much preferable alternative to just turning on Google AdSense. And that can eventually work for anyone, from simple bloggers to brands using the platform, he said.
“This has been a spectacular tool for creators who want to build an audience,” Karp said. “I love the notion that as much as you might see Hunger Games ads, you’ll see other creators looking to be discovered.”
Tumblr is not averse to working with brands. It’s previously struck deals with companies like Cartoon Network, American Express (s axp) and the BBC. But the way it worked was that brands sponsored a directory relevant to them so Cartoon Network, for example, sponsored the animation directory and wrapped it in their artwork. That led to a 5x boost in traffic to that directory. But it also kept the promotion relevant within a certain context.
“We go to great lengths to not compromise what’s special about Tumblr,” said Karp. “In everything we do, we rack our brains to not try and screw up the magic of what Tumblr is.”
Karp stresses that he isn’t looking to make 2012 the year that Tumblr starts raking in revenue. It’s just that the company can better tackle the revenue question now that it has more people on staff. Karp tried for a while to keep the team small by design but has relented more in the last year. The company is now up to about 100 employees, up from 15 at the start of 2011, thanks in part to an infusion of $85 million raised in September.
Picture aggregation isn’t deep creativity
While Tumblr has grown tremendously, the new hot social service is Pinterest, a site where people can pin images to their wall. Karp said that Pinterest fits into a longer history of curation online that goes back to gathering links. But he said this type of “hoarding” of pictures isn’t what interests him. He said he’s looking to help users build their identity through self-expression and creativity.
“Pinterest isn’t creating an identity that represents people. The design is the same, every page looks the same,” he said. “It’s easier to help people hoard or aggregate but there’s more to it than that and I think a lot of people are underserved today.”
Karp brings up the example of the iPod a few times, holding it up as an example of an ideal product. That’s what he’s trying to build with Tumblr. To get there, Karp is looking to get off the optimization and number chasing track: as companies get bigger, they often pull levers to juice efficiency and squeak out some more registrations, he said. But in his opinion, that often prevents companies from making dramatic leaps of innovation.
Tumblr has proven it’s got plenty of growth and eyeballs. The revenue question remains unresolved but I like how Tumblr is trying to find an organic way to make money. There are other opportunities in tapping the data of its users to help companies understand their interests something we’re seeing happen more with Twitter data. But Karp said the company is in it for the long haul and is looking to stand on its own two feet.
“We are determined to be a self-sustaining company,” said Karp. “We’re making progress on all fronts and that wasn’t the case before.”