DavidÂ Karp lives our tech-obsessed generation’s American dream. The 26 year-old high school drop out founded the popularÂ weblogÂ siteÂ TumblrÂ in 2007 and recently signed an agreement with Yahoo! Inc for $1.1 billion. Upon signing and officiating the deal, Karp received a $209 million cash payment. Not bad.Â Let’s observe how TumblrÂ has the successful history to inspire ambitious tech entrepreneurs.
Monetization Without Advertising
To avoid plastering ads all over the site, Tumblr employed a unique strategy. Users who wanted posts to gain more exposure on the site would have the option of paying for that privilege. The company also created and released a mobile optimized version of the service. By connecting with people who use mobile devices to access the Internet, he’d generate more profits. Within the first three years of business, Karp managed to raise $5 million of venture capital from Spark Capital and Union Square Ventures. He also managed to save money earned by working for UrbanBaby, a company that was first owned by CNET and is now owned by CBS.
Tumblr & the Social Networking World
According to Time Tech of Time.com, “Tumblr is part microblogging, part social networking.” In 2010, Karp hired Mark Coatney, a senior editor at Newsweek to become Tumblr’sÂ “media evangelist.” At Newsweek, Coatney created the magazine’s social media persona on Facebook and Twitter. He added Tumblr to that mix in 2009. With creative social media freedom onÂ Tumblr, he created witty, sarcastic and thought-provoking posts that were so popular, he quickly amassed followers. At Tumblr now, he helps media outlets determine how to use Tumblr to their advantage.
In comparing Tumblr to Facebook and Twitter, Coatney described the microblogging site as a “space between Twitter and Facebook.” On Tumblr, users have the ability to upload any type of content â€“ photos, audio files, video clips, quotes, or text. Similar to Twitter, people follow users, re-blog posts (the equivalent of a retweet) and “like” postings with a red heart. TumblrÂ users also never actually see how many followers they have.
Financial Resources for Entrepreneurs
Not all entrepreneurs who start small businesses are as fortunate as David Karp. For one, he received financial backing from venture capitalists. Acquire superior credit and a small business credit card from American Express, and as a future small business owner, you may be able use credit to launch that dream business. Raising funds is no simple task though.Â Tumblr, unlike Facebook, never had an IPO, nor did it decide to go public to raise money. Seemingly,Â TumblrÂ grew from thoughtful, strategic planning. Facebook often launched new apps, games, and other features prematurely. So kinks existed from the get go. Facebook also made the mistake of assuming that their IPO would be a success and stock sales would soar as soon as shares hit the market. Sure, Facebook is exponentially bigger than Tumblr. But the push to go public, a less-than-desirable IPO outcome, and failing features while trying to generate revenue created challenges. Bottom line: haste makes waste.