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FEATURES/Cross Border | Mar 4, 2013 | 7708 views

David Karp's Multimillion Dollar Plans for Tumblr

Facebook is the internet’s phone book. Twitter is its wire service. In Tumblr, 26-year-old Karp has built the web’s canvas. Now can he shape it into a money machine?
David Karp's Multimillion Dollar Plans for Tumblr
Image: Walter Smith
THE ART OF AUSTERITY “It’s my Jason Bourne or James Bond fantasy,” says Karp, “wanting to be perfectly mobile”

But reality bit. As Tumblr’s user base climbed into six and seven figures, the site increasingly had stability issues. Product fixes and improvements got stuck in a bottleneck. “We were getting overwhelmed,” says Arment. “I was a little too clever at times,” Karp acknowledges. “The fact that I didn’t have the foresight to build out a bigger engineering team earlier cost us some serious months. The reason we’re so much more productive today is we’ve got people now who’ve been through this stuff before.”

But there’s a trade-off. The bigger Tumblr gets, the more time Karp spends doing things that don’t play to his strengths. Schmoozing clients, dazzling analysts, rallying the troops, raising the fear of God—these don’t come easily to the reserved Karp. “We’ve never seen him angry,” says Rick Webb, who helped run a digital marketing agency, the Barbarian Group, before joining Tumblr as its ‘revenue consultant’.

For years most business-side duties were handled by John Maloney, whom Karp had hired as Tumblr’s first president after working for him at UrbanBaby. But as the company took on executives to oversee those areas, Maloney told Karp he was ready to leave. He left last April, with Karp taking over his reports.

These days what keeps Karp up at night isn’t buggy code but “team stuff. Am I being a good enough leader for these guys? Am I giving them everything they deserve and setting this up as a collaborative, positive environment? When it feels like it’s slightly off, it’s all I can think about until I fix it.”

“The process is not completed, but he could probably give you a pretty good assessment of how far along he is in that process,” says Brad Burnham from Union Square Ventures, a Tumblr board member.

Yet the process might well end with Karp back where he started. Ever since Maloney left, insiders have discussed bringing in a bigger league version of him, à la Sheryl Sandberg at Facebook—adult supervision, leaving Karp free to focus on product strategy and vision. “David’s smart enough that if he needed to manage, he could, but he doesn’t relish that, so why put him in that box?” asks Sequoia’s Botha.

“I do think it’s a good idea,” says Burnham of hiring a strong number two with a broad remit. But that doesn’t mean it’s imminent. “It’s going to take a pretty special person to go into a situation where they really complement David’s strengths and work effectively with him.”

No one is talking about booting Karp from the top spot. “My commitment to David is he’s CEO as long as he wants to be CEO,” says Sabet. Adds Botha: “Tumblr wouldn’t be Tumblr without David. He needs to be a part of the core business if we’re going to make this a spectacular success.”

For Tumblr spectacular success now boils down to one metric: Profits. Facebook has proven social’s revenue efficacy several times over—when it first crossed into the black in 2009 and, more recently, when it revealed that its nascent advertising efforts on mobile are already driving $3 million in revenue per day. Twitter, while smaller, is on a similar trajectory, with more than $545 million in ad revenues expected in 2013, according to eMarketer.

Tumblr, says Sabet, is “where Twitter was two or three years ago.” Now the company has to evolve into a sales machine, something that’s clearly not Karp’s forte: While no longer a teenage shoe gazer, he’s still too shy and introverted for the table-pounding, back-slapping role. That explains why Tumblr poached Groupon’s Lee Brown, a 10-year Yahoo vet, to become its head salesman last September and armed him with a dozen sellers, focussed on bringing in sponsors like Adidas, GE and Coca-Cola.

None too soon. Until ending its ad ban in May, the only real monetisation of Tumblr came from other people. More than 50 writers have leveraged their Tumblr blogs into books, and some have scored TV deals, including Lauren Bachelis, whose Hollywood Assistants is being adapted by CBS, and Emma Koenig, whose F--k! I’m in My Twenties is headed to NBC. Commerce within Tumblr has mostly revolved around the creation and licensing of design ‘themes’ to users looking to spruce up their pages. “For the people who are making those themes, it’s incredibly lucrative,” says Chris Mohney, editor-in-chief of the in-house news organ Storyboard. But it’s less so for Tumblr itself, whose cut of the sales adds up to less than $5 million annually, reports the research firm PrivCo.

But if Tumblr’s moneymaking efforts to date have been modest, its ambitions are outsized. Karp proposes to reinvent internet advertising and to do it while eschewing the path blazed by Google, Facebook and Twitter.In his critique of those companies’ offerings, the normally polite-to-a-fault Karp doesn’t pull punches. “Hyper-hyper-targeting of little blue links” is how he dismisses them. In 2010 he made headlines by publicly declaring that web advertising would never wind up on his network, a remark Karp’s nervous investors have been urging him to explain now that the company’s sales reps have started calling on Madison Avenue.

This article appeared in the Forbes India magazine issue of 08 March, 2013
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