Tumblr is a stickler for native ads. As long as Tumblr CEO and founder David Karp is around, the social blogging site will never display icky banner ads, and according to Bloomberg, Tumblr has no reason to use banner ads in the first place. Its native ad program has been so successful that the company is scrambling to launch a mobile ad product.
The mobile ad product set to launch sometime before the middle of this year will be an extension of Tumblr’s existing Web ad units. In other words, these mobile ads will work and act the same as its Web ads, meaning that advertisers will be able to promote posts, which is the bread and butter of Tumblr’s monetization strategy.
Right now Tumblr has just a few ad unit types. Tumblr Spotlight highlights influencers on a weekly basis, and Tumblr Radar promotes a brand’s post in a reserved section on every user’s dashboard. To make money from individual users, Tumblr, like Facebook, offers the option to promote their posts to elevate it on other users’ dashboards. And that’s the gist of Tumblr’s monetization program for now.
Tumblr doesn’t monetize from new features, Karp told us during his Uncubed keynote in November. If you look at the bigger picture, you can think of any one of Tumblr’s features as a segway into boosting engagement within its platform, like the dashboard for instance. Other than the ways we’ve already mentioned that Tumblr makes money, Tumblr doesn’t actually monetize its features alone. Instead Tumblr sells ads against its traffic. There’s over 100 million Tumblr blogs on various topics, attracting nearly 170 million monthly visitors based on the latest official Tumblr traffic stats from November. And the site broke into Quantcast’s “Top 10” networks in the United States the same month.
The mobile app should prove to be monetized the same way via promoted posts. More traffic means more advertisers looking to promote their content, which ultimate means advertisers paying a premium for a spot on Tumblr’s mobile native ad units.
With just a few ad products, Tumblr is still making a killing. Keep in mind that Tumblr could hit profitability this year, as analyst and investor Fred Wilson plugged the company during his keynote presentation at Ad:Tech. He was confident that the company had native advertising figured out and disclosed that the company would be profitable by 2013. Note that Wilson is an investor in Tumblr.