Tumblr is the Twitter of the micro-blogging world: It's stunningly simple, growing rapidly in popularity, and has had obscure plans to earn revenues. Until now, that is. They've unveiled a novel business model.
Tumblr has just completed round C cash-raising activities, as AllThingsD noted, and scored $5 million from investors Spark and Union Square (also the sole investors in its previous investment round) which brings its cash-raising efforts to a grand total of $10.2 million. Though that sounds like a lot of money to be getting on with, especially for a company for whom it would seem computing infrastructure needs were light to moderate at worst, the company has been spending more and more on servers to support its clients (who don't pay to run blogs on Tumblr) and their page visitors. Who now create an incredible one billion page views per month. Yes, Tumblr is that popular.
So how does Tumblr plan to generate cash from this massive amount of Web traffic? By shunning the traditional embedded advertising model, it seems. They also won't be going down the "pro analytics" path, which was once an option. Instead they'll be rolling out a plethora of very small-scale cash-raising efforts, each of which is an adornment to a user's Tumblog in some way--like paid, artist-created blog themes, or "stickers" that you can buy for your Tumblr friends at a low cost per item, very much like the way such companies as Zynga are monetizing their Facebook apps.
The company's clearly successful, on a rise, and is just beginning to generate "meaningful" revenues, according to its founder David Karp. In this sense, Tumblr's business model is notably different from similar Web-darling startup Ning, which has just had to batten down the hatches and charge its users in order to turn its core idea into cold, hard cash. With other industries racing to throw paywalls around their online property, Tumblr's decision seems even bolder.
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