David Karp, Tumblr CEO, who founded the company in 2007, is just 26 years old and has a cash prize of over $250 million from the sale of the microblogging company to Yahoo for $1.1 billion.
In addition to the significant financial gain, Karp will keep his position as Tumblr CEO despite the change of ownership and has announced that he doesn’t intend to alter the “character” of the company. Yahoo has already stated that Tumblr will operate autonomously under the leadership of Karp, and that it is not going to “screw it up”.
“Our headquarters isn’t moving. Our team isn’t changing. Our road map isn’t changing. Our mission — to empower creators to make their best work and get it in front of the audience they deserve — certainly isn’t changing,” said Karp.
Karp will get a personal gain of $253 million in cash from the transaction, according to estimates of PrivCo, a research company specializing in privately-owned companies. By taking over Tumblr, Yahoo gains a web platform with over 13 billion page views per month and attracts in its team another young online entrepreneur. In March, Yahoo took over Summly, a new distribution application $30 million. Its founder, Nick D’Aloisio, 17 years old, also became a millionaire.
Karp monetized his work in the past 6 years at Tumblr after he avoided focusing on company’s revenue growth, despite the high number of views and the 108 million blogs it hosts. The company began accepting advertising on its platform only last year. In 2010, Karp told the Los Angeles Times that he opposes Internet advertising, saying that “it really turns our stomachs.”
Eventually, Tumblr adopted an advertising model that allows users to pay to promote their posts on the site. The company has expanded its advertising program to the mobile version in an attempt to become profitable. According to PrivCo, Tumblr last year recorded revenues of approximately $13 million, but there was no profit. Lack of profit was one of the reasons that Yahoo offer was accepted, says Karp.
“We are not cash-flow positive yet, which means we are always running out of money. There was no expectation we were selling the company — certainly not this year. This was our providence,” said Karp. David Karp focused on services, not market share, money or media attention, says Bijan Sabet, a partner at Spark Capital fund and representative of the investment company to Tumblr board.
Spark Capital and venture capital fund Union Square Ventures are among Tumblr’s financial supporters. Sequoia Capital is an investor since 2010, followed in 2011 by Greylock Partners, Insight Venture Partners and Draper Fisher Jurvetson.
Karp founded Tumblr with money and experience gained from a software consultant position at the site UrbanBaby. Tumblr founder grew up in Manhattan. At age 17, Karp quit high school moved by himself to Tokyo. He founded Tumblr three years later when he returned to New York. Tumblr CEO has not yet earned his high school diploma.
By selling the company to Yahoo, Karp likely to lose some users of Tumblr. Sunday evening, after the news on the takeover by Yahoo, 72,000 users per hour moved their blogs to other platforms compared to the normal rate of 400-600. However, Karp believes that Tumblr will not face a massive migration of users.
“This is something I’ve been building for the last seven years and hope employs me 30 years from now,” says the young entrepreneur.