Finding ways to monetise a free internet service is always a challenge, and for Yahoo, turning a profit with the microblogging website Tumblr has been no exception.
Last month it was revealed that Yahoo had written down the value of Tumblr, the popular blogging site it acquired for $1.1 billion in 2013, by $230 million after the site failed to meet revenue targets in 2015.
Now, amidst news that the entire goodwill value which Yahoo paid for the site could be written off altogether, Yahoo is pulling out a lot of stops to try and improve Tumblr’s fortunes.
It seems to be banking heavily on advertising to achieve this, making it easier for brands to place ads on the site and reportedly undergoing talks with Facebook to serve ads through its Audience Network platform.
But on a platform where anonymity is a defining characteristic, and with a core user base that is extremely averse to advertising, is this really the right route to go down?
What’s going on with Tumblr?
When Yahoo acquired Tumblr in 2013, the site was supposed to be Yahoo’s ticket to relevancy with a young, trendy and mobile audience. Close to three years on, the company is facing problems on all fronts, and unfortunately that includes Tumblr.
One of the first signs that things were not going as planned with Tumblr came at the beginning of February, when Yahoo’s fourth quarter earnings report revealed a $230 million write-down of Tumblr’s value, nearly a quarter of its total worth.
Was this development completely out of left field? Towards the end of 2014, Yahoo CEO Marissa Mayer was confidently predicting that Tumblr would bring in over $100 million in revenue during 2015, through a combination of a growing user base and the introduction of sponsored advertising.
This prediction was a surprise to critics, who had long suspected that Yahoo overpaid for Tumblr in 2013. And sure enough, last month came the news that Tumblr had not met these ambitious revenue targets.
Part of the problem was a controversial move by Mayer in January 2015 to combine the sales team at Tumblr with the broader Yahoo sales team. This directly contradicted a promise that Mayer made in 2013 to preserve Tumblr’s independence and not “screw up” what made the blogging platform unique.
The restructuring led to confusion, power struggles and a number of walk-outs from Tumblr sales staff. On top of this, Tumblr and Yahoo advertising targets fundamentally different demographics, with Tumblr specialising in native advertising aimed at a younger audience, and Yahoo using traditional advertising to target an older demographic.
Marissa Mayer has since admitted that combining the two sales teams was a mistake, citing the “sales realignment” as one reason why Tumblr failed to meet its $100 million revenue target in 2015. Now, the integration is being completely undone as Yahoo scrambles to get Tumblr back on course.
Image by geralt on Pixabay
More bad news for Tumblr was to follow at the end of February when Yahoo filed its annual 10-K report, a document which gives a comprehensive summary of a company’s financial performance.
Of the $1.1 billion that Yahoo paid for Tumblr in 2013, around $750 million was ‘goodwill value’: the amount paid for a company beyond its balance sheet value, including things like reputation or potential for growth.
The 10-K filing disclosed that Yahoo is considering writing off “some portion or all” of Tumblr’s remaining goodwill value – a massive comedown for Yahoo, and a serious admission that Tumblr is not performing as the company had hoped.
So what is Yahoo doing to try and turn Tumblr back around? The indications are that Yahoo is planning to lean pretty heavily on advertising to boost Tumblr’s revenue. A week ago, Marketing Land reported that Tumblr has removed a major barrier to brands placing ads on the site, as it no longer requires them to maintain their own blog in order to run sponsored posts on Tumblr.
At the same time, the Information released a report that Yahoo is considering an advertising partnership with Facebook, which would allow Facebook to serve ads inside the Tumblr mobile app using Facebook’s Audience Network platform. Mobile is a major growth area for Tumblr, with 78% of its users currently accessing Tumblr through a mobile device; a partnership with Facebook, the king of mobile ad revenues, could help Tumblr to monetise that user base.
What do the changes mean for brands?
For brands looking to place ads on Tumblr, things just got much easier. Before the introduction of ‘blogless’ sponsored posts, Tumblr lacked a non-native advertising option. Brands were required to create content on a Tumblr blog and then deliver it in the form of native advertising.
Now, brands have the option of running a more traditional advertising campaign without needing to connect it to a blog on Tumblr. They can also more easily rework existing ads from elsewhere online, instead of having to design dedicated content just for Tumblr.
Up to now, Tumblr’s creative canvas has presented a daunting prospect to a lot of marketers, who are put off by the need to custom-create a whole look and feel with their advertising on the site. Blogless sponsored posts seem like a move from Tumblr to address issue this directly, and it can be seen in the difference between the ad specifications for Tumblr Sponsored Posts and Blogless Sponsored Posts.
Tumblr’s regular sponsored posts require new creative content to be “rotated in every seven days the campaign runs”, and come with a list of tips on how to best appeal to Tumblr’s user base, recommending “fun, dynamic content” with “animated GIFs and photosets [to] grab users’ attention and tell a better story”.
By contrast, the new blogless posts only offer guidelines on how to optimise ads for resolution and visibility, and don’t put as much onus on advertisers to blend seamlessly into the Tumblr environment.
It remains to be seen whether a deal will come forth from talks between Yahoo and Facebook, but if it does, brands who run ads on Facebook’s Audience Network (or who run mobile News Feed campaigns on Facebook, which are automatically opted-in to Audience Network) may see their ads appearing on Tumblr’s mobile app in the near future.
Brands who are thinking of getting into advertising on Tumblr would also be well-advised to check out Tumblr’s wonderfully sassy Global Advertising Policy, which includes such sage advice as “For legal advice, you should google “lawyer” and see what comes up”, and, “Mainly, just don’t lie. Should be easy. You’re in advertising, after all.”
Is this a good move for Tumblr?
In the past, Tumblr has struggled to woo brands to advertise on its site, a situation probably not helped by the lack of a dedicated sales team. The Information reported that Tumblr is currently only serving ads on 10-15% of its available inventory, according to well-informed anonymous sources. Tumblr is obviously hoping to turn this trend around with its recent actions, but is it a good idea?
One of the defining traits of Tumblr as a blogging network is its anonymity. This is what has made it so attractive to the many teens who choose to publish their innermost thoughts on the site, but the lack of identifying data is a big problem for advertisers who want to know exactly who they’re targeting. Presumably this is why Tumblr has turned to Facebook to deliver mobile advertising instead of Yahoo’s own Flurry.
The icon for an anonymous user on Tumblr.
The other big issue with advertising more to try and increase Tumblr’s revenue is that Tumblr’s core user base is extremely advertising-adverse. As I wrote in my guide to marketing on visual social media, when it comes to Tumblr, a smart content marketing strategy goes a lot further than plain advertising.
Tumblr’s users are tech-savvy and quick to share ad blocking solutions for marketing content they dislike. They also cultivate Tumblr as a safe space away from messages and imagery they find distasteful – so if they discover that kind of content cropping up in their feed in the form of advertising, the backlash will be severe.
Tumblr’s reputation with its core user base takes a hit every time a new wave of advertising appears on the site. This group might not make up the majority of Tumblr users, but it is key to sustaining the site.
Few users of a social network are happy when advertising first begins to appear on their site, but Tumblr users have a particularly low tolerance. Tumblr has previously respected this by introducing advertising to the site relatively slowly, and restricting advertisers to placing native ads which reflect Tumblr’s unique look and feel. But the move to introduce more traditional-style blogless ads to Tumblr is a step in the opposite direction.
That’s not to say that all advertising on Tumblr is necessarily a terrible idea. Tumblr has attracted praise in the past for its smart and skillful integration of native advertising into the blogging environment. A series of ads for an app called ‘Episode’ have seen popular uptake on Tumblr for their wacky and fun marketing – though most of them fall into the category of ‘so bad it’s funny’, but that could well have been what the advertisers were aiming for.
Tumblr is also full of dedicated niche communities centred around geek culture, film and television, comics and literature; some well-planned advertising which caters to these demographics could prove very effective.
The ultimate point is that Yahoo won’t get very far without stopping to understand Tumblr’s culture and community before planning any monetisation strategy. It already made this miscalculation once before by absorbing Tumblr’s sales team, and a year later is struggling to undo the damage.
Yahoo needs to do more than just increase the level of ads on Tumblr to monetise it successfully. Playing to the site’s strengths and unique characteristics could make the difference between turning the platform around and chalking it up as another failure.
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