Tumblr CEO David Karp: ‘The State of Digital Advertising Is Uninspiring’ [Video]

“I’ve definitely been hard on digital advertising,” admitted David Karp. In a fireside chat at the TechCruch Disrupt in New York City on Monday, the founder and CEO of the micro-blogging site Tumblr lamented that “the state of digital advertising is uninspiring.” His solution? “Telling stories that resonate with people to create customers,” he said.

Karp’s words echo those of of marketing guru Seth Godin in his book, All Marketers Are Liars: The Power of Telling Authentic Stories in a Low-Trust World. Godin could very well have predicted the rise of Tumblr when he wrote, “If great design is at the heart of the story you’re telling, you need a designer to run things.”

Perhaps the best example of storytelling in marketing in recent years is the AMC series Mad Men, where entire plots are devoted to anti-hero Don Draper’s advertising campaigns for classic (but still available) brands. If viewers are aware that they are watching a really long commercial, they’re hardly complaining.

But the opportunities for those kinds of stories in social media are limited. On Facebook and Twitter, said Karp, “It’s very much built around getting someone to buy that camera from you at that moment when they’re interested in buying a camera; it’s about A/B/C/D testing the little blue link to drive a one-and-a-half percent click-through versus a one percent click-through, which is different than what advertising used to be.”

After two years of experiments with various business models, Tumblr’s latest revenue strategy seems to take cues from smaller communities that, like Tumblr, are built on creativity.

Etsy, for example, sells search ads to its merchants, who are primarily independent shop owners or artists. Only handmade or vintage items are allowed on the online craft marketplace, and the site’s editors keep a homespun feel by featuring shop owners with great stories on the company blog.

Tumblr does offer sponsored posts on Tumblr Radar and Tumblr Spotlight, which are parts of the site where members can find content outside their networks, and where advertising space sells for $25,000 or more.  It sounds a lot like Twitter, but Karp is hoping that the medium of the visually-pleasing Tumblr blog will inspire a new model that’s “built around creative brand advertising,” he said, like the fashion blog that Lionsgate created to promote the Hunger Games.

“It won’t be the majority of our revenue,” Karp added, but “We can generate real, meaningful revenue by making some of that real estate available not just to the big brands that are writing big checks, but to carve out a little bit of real estate to the people inside the network, the creators, who are also making compelling content and who are happy to pay a few bucks to make sure that it gets the exposure that it deserves.”

Here, Karp is talking about things like highlighted posts where, for one dollar, bloggers can have a virtual sticker affixed to their blog posts to make them stand out in their followers’ feeds.

And this sort of personalization is one way that Tumblr can distinguish itself from Facebook, Twitter, and Google+. “I don’t think the other networks have done a brilliant job of making that real estate available to a meaningful chunk of the existing users,” said Karp. “Instead, they sell to people who want to come in from the outside.”

Watch the rest of Karp’s fireside chat with TechCrunch’s MG Siegler in the video above.