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From the Fastest-Growing Media Frenzy to Losing the Way - Why Tumblr Tumbled?

Once an internet frenzy valued at more than $1.1 billion, Tumblr lost nearly 99% of its value within a few years. The rise and fall teach us some invaluable lessons.

Chander Nagpal
Chander Nagpal

Tumblr was launched in February 2007 in New York City by a 20-year-old Tech prodigy and web designer David Karp, who took an idea called "tumblelogging," a trend created in 2005 by a site called, and ran with it.

David started Tumblr to give users a different kind of blogging platform that was more free-form and less complicated than other prevalent platforms such as WordPress and Blogger. It wasn't a social networking site like Facebook that required you to "friend" other users. However, there was a community-building aspect to it - it was blogging (or microblogging, depending on who you asked) platform for sharing all sorts of media. Users from all walks of life could celebrate freedom of expression and quickly compile their random thoughts and photos into one curated, design-focused space that could be entirely customized.

Within two weeks of its launch, Tumblr ended up having 75,000 users on board and encouraged David to seek funding of $750,000 at a valuation of $3 million from Spark Capital.

And it grew almost like wildfire. By 2011, it had raised $125 million, hosted more than 42 million blogs, and generated paid advertising revenues of $13 million in 2012. It was Tumblr's youth factor and the cultural heft that distinguished it from other emerging social media platforms including Facebook. And this is what perhaps attracted Yahoo to acquire Tumblr in May 2013 for a staggering $1.1 billion in cash.

"Tumblr is redefining creative expression online," then Yahoo CEO Marissa Mayer had said, calling it "the internet's fastest-growing media frenzy."

It was based on short posts consisting of text and a mixture of audio, video, images, links, quotes, and whatever else users could think of. Nearly 70% of Tumblr's visitor base was under 35, and the majority (nearly one-third) were US-based. From the beginning, Tumblr got noted for having a user base with socially progressive (often considered rebellion) views.

Users initially used Tumblr as a mood board for their interests and personality. Where LiveJournal, Blogger, and Myspace blogs were mostly occupied by personal spiels or stories of thousands of words, Tumblr was different. Users were free to post shorter updates and mix them with lyrics, quotes, screenshots, and other images they just liked.

This experimentation spawned a culture that existed, initially, only on Tumblr. The focus on user experience led to functionalities such as Dashboard (live feed), Queueing, Tagging and even allowing HTML editing of blog themes were significant differentiators. Later, Tumblr introduced integrated instant messaging which was intentionally rolled out in a gamified viral manner. All such features and functionalities fostered bottom-up communities, attracted new users, drove user retention, and even kicked off several movements.

The most notable one perhaps is the "We are the 99%" Tumblr blog which became the slogan for the Occupy Wall Street movement in 2011 as an ideology to rebel and stand up against the corporate greed and harm that the actions of the top 1% of the wealthiest were considered to cause. Another feather in the cap for Tumblr was it being credited by Oxford Dictionaries When “GIF” was named word of the year in 2012. Tumblr was one of the first platforms that incorporated GIFs in its posts. Users went crazy about them, creating and posting millions in a short time frame.

Tumblr had become the home of the “discourse.” Because of the site’s design, the conversation happened in a nesting-doll structure - to comment on anything, users had to re-blog the original post onto their page and make their additions. From there, it could be pulled onto another person’s blog with another addition, then maybe back onto the original with a clarification or a new argument. Academics have called this Tumblr’s “cascading” dynamic.  

It was this community and the engagement, the experimentation, and the differentiated user experience of Tumblr which caught the attention of Salim Ismail and a global team of experts who were researching a large number of start-ups, scale-ups, and incumbent firms as part of their writing of the seminal book Exponential Organizations released in 2014. And later on, Tumblr got featured in the list of Top100 Exponential Organizations (most flexible, agile, and scalable organizations) released in 2015.

Unfortunately, this wasn’t meant to last long. Tumblr tumbled.

So, what went wrong?

Firstly, David Karp had built Tumblr on a foundation that was perhaps too small and even shaky (per several technology gurus) to support the millions of blogs and users it ended up having. Maybe it was too fast, too soon.

Post the acquisition in 2013, the Tumblr team focused primarily on integration with Yahoo's technology systems (which were desktop-oriented). It didn’t align with the shift towards mobile in progress. And while Tumblr tinkered, competitors like Twitter, Instagram, and Facebook were rapidly developing new front-end features to draw users in.

"We were severely under-appreciated, understaffed, underfunded, and lacked many tools that could have made our work great and potentially grown the business." Isabella Kahle, former product marketing lead

And the fact that Yahoo was driven by a typical large corporate approach, the Tumblr team got pushed into fulfilling flashier, short-term priorities that "shifted every three months" and weren't rooted in what the platform truly needed.

Also, while a factor considered good by the users, Tumblr didn’t rely on knowing its users' true identities. So, while Tumblr was hugely popular and logically, every advertiser would have wanted access to its audience, the lack of individual user knowledge didn't work well for the advertisers, and they slowly started turning away, negatively impacting the revenue streams.

Further, post-acquisition Tumblr faced quite a few controversies and setbacks. The data for over 65 million user accounts was stolen in 2013 and offered for sale on the dark web. It was also banned by a few countries including China citing content related to terrorism, extremism, and pornography. Anonymity, which was a USP for Tumblr meant questionable content for teens, unchecked and ended up hitting it hard.

In its 2016 Annual Report, Yahoo ended up slashing Tumblr’s value by more than half to $482 million (down from $1.1 billion in 2013!).

And, then in June 2017, Verizon took over Yahoo (for a mammoth $4.5 billion) and placed Tumblr under its Oath subsidiary (renamed Verizon Media in 2019). And almost immediately after the acquisition, the founder and CEO David Karp announced his departure, with Jeff D'Onofrio (COO at that time) replacing him as Tumblr's new CEO.

But, the slide continued under this new ownership and leadership as well.

The user activity (daily blog posts), which had peaked at over 100 million in early 2014, declined to only 30 million by October 2018. To aggravate the situation, Tumblr was removed from Apple’s App Store in November 2018, driven by instances of the presence of child pornography on the app. In what could retrospectively be considered a valid but also a knee-jerk reaction, Verizon decided to take down all explicit content. It was a defining event and led to a sudden 30 percent drop in traffic and a mass exodus of users, with monthly traffic falling from 568 million in Oct 2018 to 369 million in Feb 2019).

And in August 2019, Tumblr changed hands once again and was acquired this time by Automattic, owner of WordPress - the very publishing site that the founder David Karp had sought to rival upon founding Tumblr for a meagre $3 million.

This was almost full circle to its original valuation in 2007!

At the time of acquisition, Matt Mullenweg, Founder, and CEO of Automattic stated that he was hopeful that the platform would grow again. He shared a vision to build passionate communities around shared interests and democratize publishing so anyone with a story can tell it, especially when they come from under-heard voices and marginalized communities.

However, over the last three years, while under Automattic, Tumblr has again faced similar issues that plagued it in its Yahoo days.

It has been forcibly aligned to the WordPress systems and workflow.

It has been plagued by the decade-old product features, a visible lack of usage of artificial intelligence for content management, and the depth of content itself which hasn’t managed to keep pace with the trends that Instagram, TikTok, Twitter, and others have brought in over the last few years.

No surprise, the monthly traffic had fallen further to only 271 million in Feb 2022 and daily blog posts to only 8.7 million. One could argue that it's still reasonable - but certainly, it's a far cry from the golden days.

Tumblr is in some ways comparable to Instagram. Though it has text capabilities, it acts primarily as a way for users to post images and include social sharing features. But while Facebook turned Instagram into a giant in its own right after acquiring it for $1 billion in 2012, Yahoo and Verizon made moves that hampered Tumblr’s growth.

While Tumblr's early success based on leveraging several of the exponential attributes did promise the immense opportunity and potential it had, the downfall has taught us a few invaluable lessons for entrepreneurs and corporate business leaders.

  1. Once an exponential doesn't mean perpetual immunity. One needs to stay nimble, be a game-changer, and stay focused on scalability and adaptability.
  2. Growing on a weak foundation is never sound business management. Whether it's the technology or the community or the business model at large, one needs to learn to walk before starting to run.
  3. Being acquired by a big corporation / acquiring a successful startup doesn't always offer rich dividends. One must ensure the marriage of purpose and culture, and leverage the best practices from respective organizations.

With Jeff D’Onofrio announcing his departure as the CEO in January 2022, Automattic CEO Mullenweg stepped in to oversee (the revival of!) Tumblr.

But will Tumblr be able to recultivate the charm that made it what it was? Or will it fade completely into oblivion?

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Chander Nagpal

With more than 25 years of experience in driving transformation initiatives, Chander is pronounced with a passion for delivering sustainable 10X impact through inspiring, engaging & enabling people.