I think that by now everyone knows that Twitter is a huge, worthless hole filled with cash. What you might not know is that Tumblr is right behind them, following the same path.
While there are lots of lessons web applications should learn from Twitter, how to run the business end of things is not one of them. Tumblr never got this message, however, and has been playing the "give us money and we'll figure out who we are later" game that Twitter is so well-known for. Somehow, despite obvious reasons not to, many investors are falling for it.
To take a digital ride back before the dot com bust, hit the break.
In the late 90s through early 2000, investors would throw piles of money at any company whose name ended in .com. After that concept failed and faded away, investors got smarter. Internet companies had to have a clear business plan before anyone would even talk to them, let alone give them money. Then, along came Twitter and changed everything back to the way it was.
According to Dan Primack from Fortune, Tumblr has received somewhere between $25 and 30 million in its most recent round of funding. The company will now be valued around $135 million. Normally this would be good news for a company, but we have another Twitter here. They seem to have no idea how they are going to make money and don't really seem interested in figuring it out right now.
Didn't we learn our lesson before? A lot of people lost a lot of money in the bust at the beginning of the decade and somehow they forgot all about it. Are these capital investors really this stupid or do they see some magic that we don't? I guess when you consider that these are the same people who gave loans to people who could never pay them back and now own more houses than they know what to do with, I guess I am not too surprised.