TUMBLR FEELING THE HEAT: New York Web Giant Under Pressure To Build A Business

David Karp Tumblr

[credit provider=”Ian Broyles via Flickr” url=”http://www.flickr.com/photos/ianbroyles/3548437276/”]

David Karp is starting to feel pressure from investors to turn his giant social blogging platform, Tumblr, into a business, sources say.The venture capitalists, particularly Sequoia Capital, who have put a combined $125 million into the company are losing patience with Tumblr’s lack of revenue, we were told.

They’re no longer satisfied with its tremendous traffic. They are concerned about its lack of a business model.

Revenue plans like the Highlighted Posts feature Tumblr recently launched have reportedly flopped.

“Tumblr should have tried [to make money] a year earlier,” says another source. “Yes, the board cares about money. They’re the board, that’s their job.”

As for the failed Highlighted Posts, this person says they were “never really a big part of the advertising plan.”

Tumblr’s VP of Product Derek Gottfrid tells us, “Highlighted posts and pinned posts were always viewed more as user features. They’ve performed at expectation.”

Underscoring the shift in priorities, Tumblr hired Lee Brown, a new head of global ad sales from Groupon last week.

Part of the new pressure Tumblr’s feeling can be blamed on fallout from Facebook’s post-IPO stock-price plunge.

“VCs feel the urge [to monetise] more now that the economic environment has changed,” this person said. “Valuations have to be justified now. Things are different. Before it was like, you have a lot of users, that’s great. Now it’s like, OK, what are we going to do with them.”

While Gottfrid says he hasn’t felt any heightened pressure from the board, he agrees the post-Facebook environment has shaken things up.

“I communicate with the board on a regular basis. I think they’ve been pretty pleased with the progress,” he says. “They have a depth of experience that we’re totally blessed with. But they also have great patience and they’ve been through a lot of this before. I think everyone is treated a little differently with what happened with Facebook, but the patient people will still be rewarded.”

Sequoia Capital partner Roelof Botha tells us via email, It’s natural to start thinking more seriously about revenue as Tumblr grows. We want to build an enduring business, and that requires creating an advertising experience that complements the community’s creativity and passion. We have the patience to get it right because we believe it’s the best approach for our users and the company over the long term.”