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When Yahoo forked out $1 billion for Tumblr in the middle of 2013, many wondered whether the tech giant had got the wooden spoon in the race to acquire the rising social networks. The year before, Facebook picked up Instagram, while Twitter got hold of Vine – two platforms that have enjoyed rapid growth and created considerable buzz. Meanwhile, GlobalWebIndex’s research shows that Tumblr is used by less than a tenth of internet users.

That said, Yahoo has a pretty good recent track record in terms of investments; its stake in Alibaba brought it a huge cash return when the e-commerce giant was floated earlier in 2014, and rumour has it that it’s close to securing a deal with the famously hard-to-woo Snapchat – an app which remains incredibly popular among the much-coveted teen demographic. So, with Yahoo now stating that Tumblr will top $100 million in revenue in 2015, the question beckons: is there real money in the blogging platform?

Last month’s launch of ‘‘Tumblr Sponsored Apps” marked the first real move towards monetisation. The gaming-oriented ads – designed to direct users to Google Play and the App Store – will take the form of sponsored posts and are initially available only to Tumblr’s mobile users. Nevertheless, the platform’s re-blogging system will allow the ads to spread to other devices and, considering Tumblr claims that 94% of posts on its platform are re-blogs, this creates a real atmosphere for viral ads.

‘Install Ads’ are a tried and tested revenue stream. Facebook and Twitter, who now make the majority of their revenue from mobile ads, have been exploiting these lucrative sources for some time. But to return to our original question – will they work for Tumblr?

Obviously, it’s all about the users – and here Tumblr has some distinct advantages. Firstly, Tumblr may be small but it’s growing – and very quickly. The number of active users on the platform increased by 120% over 2014, allowing it to overtake Facebook-owned Instagram as the fastest growing social network of the year. (Incidentally, Snapchat is currently the fastest rising messaging app: spot the Yahoo-based pattern here?).

Tumblr also has the opportunity to capitalise on the general popularity of blogging and blog-related platforms in emerging internet markets. Already, Indian internet users represent a larger segment of Tumblr’s user base than their American counterparts.

Secondly, the network’s demographics are the stuff of marketers’ dreams. Of the 35+ social platforms tracked by GlobalWebIndex, Tumblr has the youngest audience of all; more than 70% of its users are 16-34, with 4 in 10 being under 24. Compare this to a network like Facebook – where a quarter of active users are over 45 – and the differences are clear to see. So too can Tumblr boast that its active users are pretty brand-engaged: they are almost twice as likely as average to say that they discover brands through social network posts, while more than half report that they tend to buy brands they see advertised.

Tumblr’s decision to concentrate on mobile is also a smart move. GWI’s data shows that 80% of Tumblr’s active users are getting online using a mobile – almost as many as are using a PC or laptop – while 45% play mobile games each month. And while it’s just a fifth who say they have paid for a mobile game in the last 30 days, this is still above average and underlines the clear potential for monetisation.

Overall, then, Tumblr has the right user base, the right rate of growth and the right forms of user engagement to make its sponsored apps work. It’s changing from the little platform that could to the not-so-little platform than can – something which makes Yahoo’s $1 billion look like a pretty sound investment. 

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