It is obligatory to write something about Tumblr in the blogosphere or “they” will hack your site, and crash it. The Big Red Car doesn’t want that to happen, so here goes.

It is a curious case, this Tumblr story. With apologies to Charlie Dickens.

“It was the best of times, it was the worst of times, it was the age of greed, it was the age of Yahoo Marissa, it was the epoch of liquidity, it was the epoch of overpriced deals, it was the season of Porn, it was the season of VC virtue, it was the spring of the micro blogosphere, it was the winter of Tumblr, the Internet had everything before it, the Internet was its own worst enemy, every startup was going to be come a Unicorn, every startup was going bust — in short, it was like today when we suffer delusion and cannot believe that things like Tumblr ever happened.”

Tumblr is a microblogging and social networking company founded by David Karp, a natural coder, in 2007.

Money raised, Big Red Car?

Yes, dear reader, Tumblr was brought free of its cradle with the largesse of venture capital by the likes of Union Square Venture, Spark Capital, Krum Capital, Sequoia Capital, Betaworks, and individual investors.

October 2007: $750,000 from Union Square Ventures and Spark Capital.

It is reported that USV walked away with a $2-400MM payday for its $400K investment. I suspect they held their relative position and invested more than $400K, but I am too lazy to look it up.

December 2008: Series B, $4.5MM

April 2010: Series C, $5MM

December 2010: Series D, $30MM

September 2011: Series E, $85MM (led by Greylock Partners, Insight Venture Partners).

In all, Tumblr raised $125MM.

How did they make money, Big Red Car?

Tumblr was to make money by monetizing eyeballs through advertising sales. In May 2012, they wrote their first ad camaign with Adidas. Prior to this, they had tried a number of experiments.

2012 revenue $13MM, on $25MM of cost

2013 targeted revenue $100MM

What happened, Big Red Car?

In May 2013, Tumblr — on the doorstep of greatness — was sold to Yahoo! for $1,100,000,000, that’s $1.1B, that’s $1.1 BILLION dollars with a B.

The venture capital sellers were happy. They clapped their hands in the fashion of:

“If you’re happy and you know it, clap your hands.”

This chica is the woman who made the VCs clap. [I did not say she “gave” them them the clap. That would be churlish and offensive. Whew, dodged a bullet there.]

This is Marissa Mayer the CEO of Yahoo! In her spare time from CEOing, she had a Vogue shoot. I love this picture. It screams competence, gravitas, a woman who can do ………….. anything. Upside down. In heels. With red lipstick.

I love it when CEOs can fit in a Vogue shoot (talking to you, Jamie Dimon and Warren Buffett).

What Marissa and Yahoo! did was to keep David Karp, the founder, in the job as CEO Tumblr.

In 2016, when Karp and Tumblr failed to hit their numbers, Marissa Mayer and Yahoo! wrote their investment in Tumblr down by $712MM. Ouch.

Nothing says “I know what I am doing” like buying something for $1,100,000,000 and writing it down by $712,000,000 thirty-six months later.

[For you accountants scoring at home they recognized an “impairment of goodwill” expense because they had taken on so much goodwill — the difference between the value of hard assets acquired and the purchase price. One of those GAAP things.]

In June 2017, Verizon Communications bought Yahoo! and got Tumblr and Karp. Karp was sent packing in November 2017.

In December 2018, Verizon enacted a little tougher policy on porn sites (more about that later) and by March 2019, Tumblr had run off 30% of its daily foot traffic. Ouch!

Pornhub offered to buy Yahoo!’s petulant, problem child and operate it like the noble porn site it wanted to be which Verizon turned their nose up at preferring to unload Tumblr to Automattic (WordPress.com blog operator) for $2-3,000,000.

Highlight me, Big Red Car, financial highlights, please

Financial high points:

Idea in David Karp’s head — 2006.

Tumblr launched — February 2007; immediate success with 75,000 users in less than two weeks.

VC funds start to flow — $750,000 November 2007.

VCs pour in money totaling $125MM through September 2011.

VCs, Karp, et al, sell Tumblr to Marissa Mayer and Yahoo! for $1,100,000,000 in May 2013.

Marissa Mayer, Yahoo! writes their investment in Tumblr down by $712,000,000 in 2016.

Verizon owns Tumblr in June 2017, sends Karp on a snipe hunt.

Autommatic (WordPress.com) buys Tumblr from Verizon for $2,000,000 in August 2019.

This is a story of creation, scale, value creation, and a barbed wire enema thereafter.

How do the VCs who funded Tumblr feel? Rich.

How do the Yahoo shareholders feel? Tricked.

How does Marissa Mayer feel? Like another Vogue shoot.

How does Verizon feel? Got rid of the monkey.

How does Autommatic feel? Hell, they got 400,000,000 monthly visitors — sure down by a substantial amount from 500,000,000 in January 2016, but a lot of eyeballs.

Autommatic paid $0.005 per visitor on a monthly basis. Do some fancy math on an annual basis and they made a Hell of a buy in the “cost to acquire” a customer sweepstakes.

Tumblr, Big Red Car?

Look, Tumblr might have been too early. They beat Facebook, et al, to the marketplace. They did some innovative things well.

Tumblr was/is a microblogging site. Invented it.

Tumblr introduced the dashboard as a tool for social media. This dashboard allowed users to load text, pictures, video, quotes, hyperlinks to their Tumblr micro blog at the click of a mouse.

Tumblr allowed a blogger to time the posting of their blog posts.

Tumblr allowed for tagging — putting a # on a post or a picture to create a community of followers.

Tumblr allowed creators to edit their HTML code.

Tumblr provided custom domain names thereby staking out customized digital real estate on the the Interwebs.

Tumblr had some problems.

Tumblr fell into the porn trap (including child porn that is a huge criminal issue). You can get an argument on how much of Tumblr was porn, soft porn — but nobody says it wasn’t porn. That hurt.

When Verizon tried to deal with it — the “female-presenting nipple” thing — after prior owners basically ignoring it, they paid a heavy price.

[Note: the problem with porn is the advertisers hate it — really hate the child porn angle. If you are showing a lot of porn, then you have to deal with the advertisers. If you don’t they go elsewhere. No money. No business.]

Tumblr had the typical hate speech, LGBT community, suicide prevention, eating disorders, foreign censorship, Russian political interference, spambots, Stop Enabling Sex Traffickers Act, security breaches, copyright, and Digital Millennium Copyright Act take-down issues. Actually, anybody in this space has to deal with these issues. Tumblr didn’t do better or worse than anybody else.

Bottom line it, Big Red Car

OK, dear reader, here is the bottom line.

Tumblr was early.  They were innovative. Even today they host 475MM blogs. They are no longer cool. Being no longer cool can be fatal. It definitely sucks value out of an enterprise. [Important point: Taylor Swift still uses her Tumblr microblogette. Cool?]

At a point in time, Tumblr had more users than Instagram (valued by Facebook today at $200B) and Pinterest (valued by the public market at $18B).

Some VCs made some good money on and in Tumblr, but today they deal with the stigma that they engaged in the porn business.

There have been some truly world class slap fights over this. Take a look at Scott Galloway’s comments and exchange with Freddie Wilson of Union Square Ventures back in 2016. Ouch.

[I vouch for Freddie’s general goodness and virtue. He’s generally a mensch. He was the Chairman of the Board of Tumblr. Freddie doesn’t deny there was porn on Tumblr; he does contest the amount. Sort of like being a little dirty. Sort that out for yourself.]

What VC wants to be called a porn guy? A child porn guy? I think Freddie’s a solid guy, writes a great blog, but the facts as a guy like Scott Galloway threw them out are whatever they are.

Tumblr, after the sale, killed value like a chainsaw. It got sold at a fire sale.

The VCs have moved onto other deals.

David Karp is 33, worth $200MM, had made some angel investments, sits on the Planned Parenthood Board of Directors, came out to support Hillary in 2016, and split with his girlfriend back in 2014. No word on who got their dog, Clark.

So, dear reader, there you have it. The good. The bad. The ugly. The impact of timing.

“It was the best of times, it was the worst of times ………. “

But, hey, what the Hell do I really know anyway? I’m just a Big Red Car. Be good to yourself. Be good to someone who needs a little bit of goodness. Call your parents. Send them a pic of their grandchild or you. Is this a great country or what?