Yahoo! (YHOO) has purchased Tumblr at a particularly difficult time in the life cycle of a Web startup. The users are there, creating and reading posts, asking the company for nothing except reliable server performance—and nothing in the way of major changes. Now it falls to Yahoo to figure out how to turn that traffic into revenue, a problem that continues to bedevil pretty much every popular social-media property on the Web.
To understand the nature of that challenge, it helps to look at the content, and the traffic, that Yahoo is buying. There is the porn, obviously. To recap, approximately one in every six pages on Tumblr has some kind of adult content, according to PrivCo, a firm that tracks private companies. Tumblr has been quietly chopping down on the smut, and only one of its top 25 sites today is pornographic, according to Quantcast.
The rest of Tumblr’s most popular blogs are SFW, but they’re not exactly mainstream. The single most-visited Tumblr is dedicated to Minecraft, followed by a Portuguese-language site specializing in animated GIFS and one that translates people’s names into various languages spoken on science fiction shows. Professional media outlets and brands make up three of the top 25 (Comedy Central; Clarin, the Argentine newspaper; and Angry Birds). Other particularly popular sites are a blog juxtaposing handsome men and adorable kittens; a blog shaming people who act like douchebags on other social-media platforms; and various collections of cartoons.
Not to take anything away from animated GIFs. Some people love that stuff, 12- to 25-year-olds in particular. But much of what appeals to Tumblr’s audience might be hard to sell ads against, said Allen Weiner, an analyst at Gartner. He says that Yahoo’s task will be to break up Tumblr into different buckets of content, focusing on what it can sell ads against, and letting the other stuff live on without interference—or revenue. “There’s a bucket that will have no monetary value—none,” he said.
The other question is where Tumblr will find new users. There are only so many hipsters, and Tumblr may be reaching the limits of its growth.
After drawing a record 90 million unique users in November, Tumblr has been bringing in fewer people both through the Web and mobile, according to Quantcast. Over the last month, 75.3 million people visited Tumblr blogs. Sam Hamadesh, founder and chief executive of Privco, says Tumblr could grow internationally but probably isn’t going to begin appealing to older users in the way that, say, Facebook (FB) did.
“The traffic has peaked, unless they can find a way to move upmarket,” he said. “There aren’t a lot of grandparents dying to get onto Tumblr.”