Tumblr Raises $85M Despite Skinny Revenues

In today's volatile markets, investors even have a tough time buying solid
companies like Proctor & Gamble (NYSE: PG ), Coca-Cola (NYSE: KO ) and IBM
(NYSE: IBM ). Isn't the world falling into a recession? Well, this kind of
pessimism means nothing to venture capitalists. Not even the terrible IPOs of
Pandora (NYSE: P ) and Demand Media (NYSE: DMD ) have had an effect. Hey, there
always is something new in Techland. Just take a look at Tumblr. This week, the
company raised a cool $85 million in financing. Investors included Greylock
Partners, Insight Venture Partners, The Chernin Group, Capital, Union Square
Ventures and Sequoia Capital. Even Virgin's Sir Richard Branson wrote a check.
Why all the excitement? Basically, Tumblr is a next-generation Twitter service.
It makes it much easier to share things like photos, links and videos. You also
have full power of customizing the theme of your blog, such as with funky colors
and graphics. And Tumblr is growing like a weed despite having just about 50
employees. For example, the site now has more than 30 million blogs that
generate about 13 billion page views per month, which is up from 2 billion per
month at the start of the year. A big part of the growth story has been with
mobile use especially on Apple's (NASDAQ: AAPL ) iPhone as well as
penetration into foreign markets. Tumblr also has been extremely popular in the
fashion industry. Yet there is a sticking point: revenues. For the most part,
they are fairly minimal. Of course, Tumblr's investors think the company
eventually will have numerous various ways to monetize things. This has been the
case with other standout web services like Facebook and YouTube. Then again,
there are other examples where this theory turned out to be a bust, such as with
ICQ. But VCs have no choice but to make big bets. And so far, Tumblr has the
kind of growth ramp that attracts mega-bucks regardless of the market
environment. Tom Taulli is the author of "All About Short Selling" and
"All About Commodities." You can also find him at Twitter account @ttaulli.
He does not own a position in any of the stocks named here.