1. Investment Highlights
February 2012

2. What Is Tumblr?
a microblogging platform and
social networking website
that allows users to post text,
images, videos, links, quotes
and audio to their tumblelog,
a short-form blog.
Tumblelog is to blogging as
text messaging is to email.
As of January 5, 2012,
Tumblr had over 39.5 million
blogs and more than 15
billion total posts.

3. Tumblr’s Place in the Social
Media Ecosystem...

4. Valuation

5. Valuing “Mature” Social Media
Companies
We triangulate value for “mature” companies
based on three metrics: forward revenues,
discounted earnings and cash flows.
Facebook only reached relative maturity over the
past year and still claims a high revenue multiple of
roughly 15x-20x, valuing it at over $90B.
Some non-financial metrics include: Monthly Active
Users (MAUs), MAU growth, Unique Monthly
Visitors (UMVs), UMV growth.

6. How We Value Young Companies
How fast is the company building the treasure trove of customer data?:
Measured by UMV and monthly user/blog growth.
How unique is the value proposition?
Track record of the management team and its main investors.
Revenue multiples are not good early indicators, while company is
building up a user-base.
Facebook had only $150M in revenues in 2007 yet commanded a
valuation of over $15B.
Twitter had $100M-$110M in revenues for 2011 yet it’s being
valued between $8B-$10B.

7. Tumblr’s valuation
As of Fall 2011, Tumblr had a valuation of $800M.
Valuation seems reasonable versus peers at the same stage.
Tumblr reportedly has “scant” revenues.
If Tumblr is unable to execute on a revenue model in 2012, it
should take a hit to valuation.
Major investors include: Union Square, Spark, Greylock, Sequoia.
Management team:
David Karp-Founder
John Maloney-President (Founded UrbanBaby)

8. Unique Monthly Visitors
• Tumblr has seen over 100% growth YoY
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10. SWOT Analysis

11. Strengths
Microblogging seeing increasing popularity vs the number of
blogs has seen a steady decline in individual blogs over the
past two years.
Revenue model beginning to take shape:
Themes for purchase
Pay to highlight posts
Advertising masked as “promoted” posts coming soon
Tumblr has avoided putting up banner ads, which has
become the kiss of death amongst hipsters.

12. Strengths
Very easy to create an online persona than on
other networks like Twitter.
Content published on Tumblr has greater potential
to go viral than most other social networks due to
its “reblog” and lack of comments features.
Widely adopted by pop culture.

13. Weaknesses
Lack of robust business model.
Revenues haven’t kept up with the site’s user growth.
Tumblr’s lack of revenue generation has become a barrier to
investment.
Adult Content and SPAM are problematic, scaring away
potential advertising.
Tumblr claims 3% of traffic is NSFW (we think it’s much
higher).
Tumblr’s openness has encouraged scammers.

14. Opportunities
Continue to embrace the App revolution.
Partner with music, chat services like Spotify and
Skype.
Monetize partnerships with core demographic.
NY Fashion Week partnership was a big
success.
Address adult content issue before the site gets
too big and take the hit to subscribers now.

15. Threats
Someone builds a better mousetrap.
Solid revenue generation never realized.
Investors tire of lack of exit strategy.
Tumblr is not successful in hiring solid management/
operations team.
Do not raise enough money to scale the company to
maintain a robust platform.

16. Summary
Tumblr has captured the niche microblogging
demographic.
UMVs have increased over 100% between 2010 &
2011.
Tumblr needs to address its advertising impediments.
$800M valuation seems reasonable for now.
Ability to execute on revenue model will be key driver
in 2012