The joke now is what’s the first tech company that we acquire. I hear AOL’s going pretty cheap.

– David Karp, founder of Tumblr, to the Guardian’s Josh Halliday

In its early days, the service didn’t have the “steep social network growth” you might expect, because it was about a core community of creators, Karp said. The company originally set out to build novel tools that offered an escape from the restrictive templates of Facebook and Twitter.

When the site really took off was when the curators — people who primarily respond to other Tumblr users’ content by “reblogging” it on their own pages — came on board.

Today, creators are probably 10 percent of Tumblr, and curators are 90 percent, Karp estimated.

And further, the average post on Tumblr is reblogged nine times, he said.

That can mean a single post gets the amplification of nine separate blogs, nine RSS feeds, nine blogs’ page views and followers, and nine bloggers’ syndication on Facebook and Twitter. “So your content has a huge footprint,” Karp said.

What’s next for Tumblr, which just raised a bunch of money and brought in some senior management? Well, monetization, for one thing. Karp said Tumblr is pursuing “novel approaches to revenue,” including selling blog themes.

At 15 billion page views per month across more than 41 million blogs, “with that many page views we could throw AdSense up there tomorrow and be profitable,” Karp said. But that’s not what he wants to do.

Karp said Tumblr is also working to “try and filter our network in ways that are more appealing to a global market.”

He added that Tumblr takes pride in being a New York-based company, and in hiring people with experience building things on the Web, rather than degrees from schools like Stanford. Half of Tumblr’s recent hires have relocated to New York to work for the company, most of them from the West Coast, Karp said.

(Image courtesy of DLD)

Fortune.com’s Dan Primack reports that Sequoia is leading a round that will add “between $25 million and $30 million” in funding at a valuation “in the ballpark of $135 million.”

Someone familiar with the transaction tells me that Primack’s numbers are “not a bad guess.” And it’s possible the numbers will end up somewhere higher than his report. Another source tells me that the round will end up bringing in between $20 million and $30 million, at a pre-money valuation of $120 million. That would put Tumblr’s value at $140 million or more.

In any case, it’s a lot of money. And as wise Om Malik says, “Investors are never the story.” (Except when they are. And what’s really relevant here is that at these prices, the list of potential Tumblr acquirers gets much smaller: Google, sure. Facebook, perhaps. Yahoo, theoretically, etc.)

The real story for Tumblr remains the one we’ve asked every other time the company has raised money ($4.5 million in 2008; $5 million earlier this year): How’s it going to make money? Founder David Karp has offered several different ideas in the past, but as far as I can tell, none of them have really taken off (the fact that big publishers like Newsweek now maintain Tumblr sites, which are free to set up, does not constitute a business).

Best I can tell, the real appeal for Tumblr is its go-go growth, and the fact that it’s doing it on a very light footprint. But don’t take my word for it: Ask Spark Capital’s Bijan Sabet and Union Square Ventures’ Fred Wilson, who have been the primary investors in the company to date and who both wrote glowingly about the company in recent days.

Presumably, the company’s pitch to investors went something like this: “Look at our hockey stick! Hockey sticks like this only come around a few times a lifetime–perhaps you’ve heard of Twitter?” That is: Buy now, and we’ll figure out money later.

And it looks like it worked.

Who wants to bet on a Web company with lots of users but very little revenue? The same people who bet on it before. Spark Capital and Union Square Ventures have poured another $5 million into Tumblr, which lets people quickly and easily set up lightweight blogs.

Three-year-old Tumblr doesn’t charge its 4.5 million users for the service. It doesn’t sell advertising on the page views they generate. And it is only now beginning to generate “meaningful” revenue, says founder David Karp. (That’s Karp, flanked by two employees, engaged in some kind of new-fangled xtreme sport, on the cover of this week’s New York Magazine)

But this hasn’t dissuaded Spark and Union Square, the sole investors in the company’s C round, as well as its B round in 2008.* The company has raised $10.2 million to date.

So now what?

Karp, who turns 24 this summer, says his company has “carved out a real and substantial niche” in the last year, and he brandishes numbers to bolster his case. The service, for instance, is now generating one billion page views a month. Here’s a chart! (Click to enlarge.)

But until recently, Tumblr’s growing popularity hasn’t done much beyond racking up big infrastructure bills. Now Karp says the company is changing this by rolling out a series of paid services.

The Los Angeles Times has a nice summary of new services, and Karp says there are a “dozen more in the pipeline.” But the short version is that these are primarily bells and whistles–like digital “stickers” you buy for your friends at a buck a pop–that passionate Tumblr users may like, but don’t need.

This is a switch from the company’s earlier plan to bundle lots of must-have features into a “Tumblr Plus” subscription service aimed at its most passionate users.

The new strategy is a little more seat-of-the pants, but the bet is that it may be easier to coax money out of people a couple dollars at a time.

Not coincidentally, this is the same model that’s working out very well for social gaming companies like Zynga, which is also funded by Union Square Ventures (and to a lesser degree OMGPOP, which is backed by Spark).

Zynga is reportedly profitable, and many have it pegged for an IPO in the near future. I don’t see that in Tumblr’s cards, but if Karp and crew were interested, I can see them attracting interest from the likes of Google (GOOG) and Yahoo (YHOO) sooner than later.

Maybe sooner in Yahoo’s case, if it can’t snap up another company whose CEO also graces New York Magazine’s cover this week.

*“Inside rounds” like these are supposed to be no-nos in the VC world because existing investors traditionally want to find new money to validate their wagers. For the counterargument, consult Tumblr investor Bijan Sabet’s blog (hosted by Tumblr, of course).

You owe me. I had to get off my sickbed today to call David Karp, the CEO of Tumblr, and ask him if he really was in talks to sell his company to Yahoo (YHOO), as you reported today on Gawker/Valleywag. For the record, David says your report is “categorically untrue.”

I’d spend more time discussing it, but, as I said, I’m feeling under the weather. And your story is not true. So here’s what Karp has to say via his Tumblr account.

And here’s what Marco Arment, who helped start Tumblr with Karp a couple of years ago, says:

And here’s what venture capitalist Bijan Sabet, whose Spark Capital helped raise a $4.5 million round for Tumblr last year, says via his Twitter account:

Now I’m going to return to my convalescing. Please give me a break for another day or so.

[Image Credit: Library of Congress via Flickr]

Instead, the New York-based company has just raised a $4.5 million Series B round that its CEO, 22-year-old David Karp, says will fund it for two and a half years. Union Square Ventures and Spark Capital, which led the company’s first $750,000 round a year ago, also led this financing. My educated guess is that its investors now value Tumblr at around $15 million.

Tumblr is a “microblog” platform that is supposed to let its users quickly create nice-looking posts with a minimum of effort; it sits somewhere between Twitter and full-fledged blogs like Blogger and TypePad. It is popular with a relatively small but prolific user base: Its 500,000 users have created pages that draw 15 million unique visitors and 61 million page views a month, Karp says.

Money? Nope. Tumblr is free–and has no ads cluttering up its hipster vibe.

Way back in 2007, those kinds of numbers would have been catnip for the likes of Google (GOOG) or Yahoo (YHOO). Now, though, even deep-pocketed buyers aren’t racing to snap up revenue-free start-ups. But Karp says raising money from his previous investors was easy: “These guys came to us with a deal that made us incredibly comfortable.”

Karp says he’s going to start generating money in early 2009. Not by selling ads on his members pages–Karp thinks the site will eventually incorporate ads in some way, but not yet–but by selling users “premium” services, most of which he’s not ready to describe. He does promise they will be “really sexy.”

More practically, Karp points out that other Web services, like the WordPress blogging platform and Yahoo’s Flickr photo service, have been able to upsell many of their users with goodies like extra storage. He figures many of his users will pay up, too.

The new money means he’ll have time to prove his thesis. Karp has just doubled his staff–which means there are now all of six people on payroll. One of them, hired in September, is John Maloney, Karp’s former boss at Urban Baby, where he started his Web career. Maloney is now in charge of business operations.

The money also means there are heightened expectations. Karp has done much more than people twice his age (and has the press clips to prove it). But the newest funding round means his investors think the company will be worth as much as $50 million by the time he sells it or raises more cash. In order to prove them right, he’s got a lot of work ahead of him.

[Image Credit: David's Log]