Core Business On The Block, Yahoo Turns To Fixing Disappointing Tumblr

SAN FRANCISCO — Yahoo hopes to ramp up Tumblr's revenue by rolling out new ad products for the social network later this year, the company said Thursday. The new ad products will be sold by a revamped Tumblr sales team that will be shared with Polyvore, another social media company purchased by Yahoo in 2015.

Yahoo purchased Tumblr in 2013 for $1.1 billion, hoping the New York-based social network would turn into the next great digital advertising service, but it has failed to live up to those lofty expectations. For 2015, Yahoo CEO Marissa Mayer had told investors to expect Tumblr to break $100 million in revenue, but earlier this month, she announced that Tumblr had not met that goal.

Speaking at the 2016 Yahoo Mobile Developers Conference, Yahoo Senior Vice President Simon Khalaf took responsibility for that failure. "I'm part to blame. I came in and I said, 'All I care about is freaking [daily active user] growth," Khalaf said.

With Yahoo's core business now on the verge of being sold, Tumblr is turning its attention back to advertising. The company said it has new ad products that will be coming out, and earlier this month, Yahoo said Tumblr would have its own dedicated direct sales team. That's not exactly true, however.

Instead, Tumblr will be sharing a sales team with Polyvore, a social shopping site Yahoo purchased last year, Khalaf said. The team will be led by Polyvore Chief Operating Officer Arnie Gullov-Singh and will be tasked with improving both Tumblr and Polyvore's revenue. Khalaf declined to give 2016 revenue goals for either service.

"We could've done better in terms of introducing more ad units," Khalaf said.

Tumblr's focus on user growth may not have produced significant revenue, but it brought more users to the social network and kept them there longer, Khalaf said. This was done by rolling out features designed to make Tumblr users keep coming back more often and to make it easier for new users to get started and for all users to find important content they missed while away. "We changed this model to create more urgency to get to Tumblr on a daily basis," Khalaf said.

Over the past year, Tumblr saw its number of daily active users grow by 34 percent, although the company fails to specify exactly how many daily active users it has. But its number of monthly active users is still only in the "tens of millions," Khalaf said, far fewer than competitors like Instagram, Twitter and Facebook, all of which count more than 300 million monthly active users.

Instead, Yahoo likes to boast that Tumblr reaches more than 600 million "monthly unique visitors," which includes anyone who makes their way to Tumblr without necessarily signing into the service. That figure is up from 300 million in 2013, when Yahoo purchased the social network.

In 2016, though, the focus is no longer simply on bringing in more users. Now Tumblr will also be ramping up its focus on advertising. "We can do two things at the same time," Khalaf said.