August 26, 2011, 12:55 PM — Remember how Facebook and Twitter were supposed to be the death of blogging? Apparently nobody told the people investing in Tumblr.
According to the Wall Street Journal, the blogging service is close to getting between $75 million and $100 million in venture capital, which would value Tumblr at about $800 million.
If you're not familiar with New York-based Tumblr, it provides a platform for people to easily create their own blog sites for free. Not even the special services provided to bloggers -- custom URLs, use of third-party apps, bookmarklets, Google optimization -- cost anything. All free. If bloggers want a custom webpage theme, they can pay anywhere from $9 to $49, but that's not going to add up to a $800 million valuation.
So how does Tumblr make money? Good question, and one that has crossed the minds of the folks on Sand Hill Road.
From the WSJ:
The lack of revenue kept some major Silicon Valley venture firms from signing onto the deal. But at least one big firm—Greylock Partners, an investor in Facebook Inc. and Groupon Inc.—is participating, the people said.
It could be that Greylock, assuming the WSJ's anonymous sources are correct, is doing what all venture capitalists do: Spreading their bets and taking a chance. For all the talk about solid business plans and revenue models, venture capitalists really are in the guessing business. They try their best to make the guesses educated, but in the end it's all about pumping millions of dollars into unproven ventures in the hopes that some of them will be big hits.
And the bet here is that Tumblr's user and page-view growth (can anyone say "eyeballs"?) will somehow translate into revenue. According to comScore, Tumblr doubled monthly unique U.S. visitors to 13.4 million in July from 6.7 million last December, while it increased U.S. page views during that same time period to an attention-grabbing 3.8 billion from 1.6 billion, far surpassing rivals Blogger and WordPress.
"Questions around monetization still exist," Sequoia Capital partner and Tumblr director Roelof Botha told the WSJ in May, "but the company has absolute scale, massive traction, and huge growth and money-making potential."
If not a money-making plan.