Tumblr's CEO brainstorms microblog monetization

I’m working on a column for Fast Company Magazine about how microblogging companies like FriendFeed, Twitter, and Tumblr might make money. Here’s a little sneak peek based on a conversation I had today with Tumblr founder/CEO David Karp.

First, we didn’t focus on just advertising. Tumblr is joining media sharing sites Flickr and SmugMug into charging its users for stuff. People in the industry call that the “freemium” model. Give away one version, but charge for more features. Like what Flickr does. SmugMug goes further and just plain charges, but it’s worth it for what you get, which is why they have tons of happy users who pay.

“Hopefully this stuff will be slick enough that people will appreciate it,” Karp told me, saying he thinks people will pay to use Tumblr’s cooler features.

But that stuff is already known, along with the standard old advertising model. Let’s talk some bleeding edge stuff and can it be applied to Twitter? (I might drop in on Twitter tomorrow unannounced to see what I can learn about their monetization features).

He’s motivated by what he saw happen on Facebook. “Ben and Jerry distributed free little items,” Karp said. “It was the social gesture.”

The social gesture? Yeah, by passing you something cool, people appreciated that and either passed back something else that was cool, or passed it onto all their friends.

“This ad is really an endorsement,” he told me. It was a way for people to tell their friends that Ben and Jerry’s is a cool brand and this is a cool thing to play with.

Then we talked about Tumblr. Already in my little brush with Tumblr’s lead developer I saw a real-world demonstration of how this works. He claimed he didn’t read me, because he doesn’t find my content useful. But within 20 minutes of me posting that he had updated his post saying he saw it. How did THAT happen? Someone sent it to him on Facebook.

And, over on Tumblr, I was able to reblog his post to my own Tumblr, which caused a little note to show up on his original post.

The whole thing is viral and takes advantage of our egos.

Now take the kind of advertising that Tumblr could do in the future. Ones where by interacting with the ad you cause things to happen. Click a “I drink Coke” ad, for instance, and your avatar could change to include a Coke icon.

These kinds of interactive advertisements that share your social guestures are a lot cooler than banner ads, Karp told me. He said that these features, which include reblogging, are a “more refined version of trackback and pingback.”

Other things?

The standard blogger deals where someone blogs for a year, builds up an audience, and gets a book deal, caught his eye. So did the College Humor site, which became popular on Tumblr. They got noticed, Karp told me, got the attention of the Web and turned that into a TV show.

How about donations?

Tumblr has been a partner of Tipjoy’s for a while. “You can give a blogger a buck when they make a neat post,” Karp told me.

Search and destination?

When you search on Twitter Search, for instance, you are presented with a bunch of users who have left Tweets. What if users who paid $5 a month could have color icons while everyone else has black and white? Or, a purple star next to their name? Think that’s not important? Right now Flickr is reminding me that I haven’t paid up because my name doesn’t have “pro” next to it, like Thomas Hawk’s does. Makes me look lame.

But, if you are searching for something, like what people are saying about ski resorts in Tahoe, because you want to see the snow conditions or something like that, doesn’t that open yourself up to a new kind of advertising? Sure it does. Google taught us that. But social networks can go a lot further because they can show you information from your friends. My ex-boss was asking just that on Twitter tonight to see if he should take his family to Tahoe this weekend. Imagine if Northstar sent him a note saying “hey, your friend Mike was just up here, check out his photos.” What else could be done in search to bring more visibility to certain posts, or companies? Lots, Karp told me.

How about a public directory where you can only see people who paid $5 a month? He thinks such a thing would be very popular because bloggers want to be found and other people want new kinds of filtering to find the serious users of a system and what’s better than knowing someone paid a little money for a listing?

Now, what about the users?

So far we covered how Tumblr or Twitter or FriendFeed might make money. But what about the users? Do they want to just blog for free, or do they want to try to make a living. And make a living without selling their editorial down the river?

How do users share in all this and can the best users make enough to quit their day jobs? Karp told me that most of their traffic comes from the top 40% of their users, so how can he reward them? He has some ideas on that too, but that’ll have to wait for future interviews and the article.

What innovative ways do you think Twitter, Facebook, FriendFeed, and Tumblr will be able to make money?

Oh, and if you work at a microblogging company, I’d love to talk to you about this stuff.

Are bloggers & social networks killing the big shows?

I’ve noticed a trend lately (actually I noticed it back when I worked at Microsoft and my bosses kept refusing to buy booths at conferences, saying they didn’t return the ROI, but that trend has grown and grown big time). Big companies are throwing their own parties to get news out inside of going to big trade shows. Last night I was at Facebook’s party, where they told everyone they had just passed 140 million users. That deserves a blog post of its own, but we’re here to discuss the trade show crunch.

Earlier in the year we attended a day-long event where Electronic Arts introduced a bunch of bloggers to Dead Space, here’s our video with the producer of that.

I’ve watched as Apple invites a few hundred bloggers and journalists into a conference room at its headquarters in Cupertino and gets the news out to the world without having to go to an expensive venue.

What changed?

Blogging and online video.

Big companies are looking at the millions of dollars they spend for booths (not to mention bringing employees to) and are realizing that it’s just not getting the return on investment that they should get.

My sponsor, Seagate, told me they are reducing their spend this year at CES. AMD and Delphi are doing the same thing and I’m hearing about many other companies who will either stop going, or reduce the size of their booths, either this year, if they could, or in 2010 (contracts make it tough to shrink booths as fast as companies might want).

The news is all over the place about Apple’s decision to stop going to MacWorld. It’s being discussed on FriendFeed big time. This post’s thesis got 40+ comments in about an hour.

To me this makes total sense. Why? 44,000 people go to MacWorld. Hell, a lot more people watch Engadget report from that much cheaper conference room.

And Apple has the personal touch already thanks to their stores. They don’t need to meet with consumers anymore in expensive trade show booths that, simply, aren’t a very good experience anyway.

So, what should we expect over the next year? A lot of bad news for big trade shows.

What’s killing them? The Internet. You can launch a product live now from a living room. Thanks to Stickam, Ustream, Qik, Kyte, YouTube, Flixwagon, Viddler, Vimeo, SmugMug, etc and blogs.

Just give the people on Facebook something to pass along and talk about and your product is out there, big time.

I wonder, will 2009’s CES be the last one I attend? I remember when I thought that about Comdex, which everyone thought was too big to die.

I think it’ll be a miracle to see CES make it to 2011. Why? Blame it on the bloggers.

That all said, I’m participating in a bunch of events at CES and I’m tracking them all (and ones at Macworld) on my Upcoming.org calendar. Hope to see you there. It might be our last time!