Tumblr is losing $30M each year, CEO says

If we’ve learned anything from this past year of Twitter clones, CEO fights, shitposting and bad, money-grabbing policies, it’s this: making a social media company profitable is hard!

After rolling out some unpopular features, Tumblr is now trying to “build in public” and be more transparent about the business behind the fandom-driven platform. In a livestreamed Q&A, CEO Matt Mullenweg and COO Zandy Ring fielded questions from Tumblr users about the company’s direction. The executives weren’t completely unfiltered (Matt, please, answer my question about how much money the blue checks brought in — I want to know!), but they did offer some interesting insights into what it’s like to run Tumblr right now.

According to Mullenweg, Tumblr is spending about $30 million more than it makes each year. This isn’t too surprising, given Tumblr’s history as a company. Founded in 2007, the blogging site was acquired by Yahoo (TechCrunch’s parent company) for $1 billion in 2013. But by 2019, WordPress parent Automattic bought Tumblr for just $3 million. Though it has a loyal base of power users, Tumblr has also struggled to grow its daily active users since its infamous porn ban.

Middling social platforms have an opportunity to grow amid the “exodus” from Twitter, and Tumblr is no exception. When logging into your Tumblr account, you’ll see a link that reads, “Coming from Twitter? Sign up.” And amid the backlash at Twitter’s paid verification product, Tumblr increased its iOS revenue by 125% by offering two blue checks for $8. These blue checks do not do anything. They’re just funny.

Still, Ring says that Tumblr hasn’t had that dramatic of a bump in its user numbers.

“People have this impression that we have massive growth right now, and we really don’t,” she said. During this Q&A, which was promoted on the top of users’ dashboards, only about 300 people tuned in at a time.

In November, Mullenweg told The Atlantic that Tumblr’s iOS downloads had increased 62% the week that Elon Musk finalized his Twitter acquisition. According to data that TechCrunch viewed from data.ai, Tumblr gained 880,000 new installs across iOS and Android in November, up from 450,000 and 500,000 in September and October, respectively. But in the following months, its download numbers returned to standard levels (around 400,000 to 500,000 downloads per month).

This Q&A session took place a day after Tumblr published its “core product strategy” on its staff blog, which caught users off guard, since it looks more like notes from an investor slide deck than a blog post.

“The underlying problem is that Tumblr is not easy to use,” the post reads. It outlines various changes, like making the difference between reblogs and replies less confusing to new users, or collapsing reblog threads. In the post, the company wrote that it would improve “algorithmic ranking capabilities across all feeds,” which some users misinterpreted as Tumblr saying it would force an algorithmic feed on its users, causing uproar across the site.

“Chronological feed will always be an option,” Mullenweg clarified.

The fundamental tension of Tumblr is that it doesn’t have enough users to be profitable, but the users it does have are fiercely protective of the site’s culture — and, they don’t follow standard consumer behavior patterns (they will pay to send crabs to their friends, but they will not pay to subscribe to creators). So, Tumblr’s emphasis on making sign-ups easier and improving discovery can feel like a harbinger of unwelcome change to the site’s most dedicated users.

Through out the Q+A, Mullenweg and Ring emphasized that they would not make any permanent changes without user feedback. But regardless, making an extra $30 million per year is a serious challenge. Tumblr will probably have to do more than sell useless (yet hilarious) digital goods if it wants to stay afloat.