With Yahoo! Buying Tumblr, How Much Does Social Media Marketer Gary Vaynerchuk Stand To Make?

I have a simple question for you: How much does social media guru Gary Vaynerchuk stand to make from Yahoo's purchase of Tumblr? On Gary Vaynerchuk’s website, he discloses that he has an investment in Tumblr.

I have a simple question for you: How much does social media guru Gary Vaynerchuk stand to make from Yahoo’s purchase of Tumblr? On Gary Vaynerchuk’s website, he discloses that he has an investment in Tumblr.

As far back as 2008, according to The Wall Street Journal, Gary has been seen “backslapping” with Tumblr CEO David Karp. Gary’s website is hosted on Tumblr, something that, in arguably an extraordinary step, was announced on the Tumblr staff blog in February of 2009. In his first book, Crush It, Gary compares and contrasts WordPress with Tumblr, but I feel he clearly was arguing in favor of readers using Tumblr over WordPress, going as far as to have an aside on Page 63 that says, “E-mail me at Gary@vaynermedia.com for details about the press conference I’m going to have to explain why I’m a fan of Tumblr.” In his follow-up book, The Thank You Economy, Tumblr is consistently mentioned with Twitter and Facebook. WordPress, at least in an initial Google Book Search of The Thank You Economy, is not mentioned at all. (The need for transparency on any company’s part because of social media; however, is.)

You might be thinking, well what about the VC people? Don’t they do shady stuff like this too! YES! Absolutely. But I don’t know too much about their world. I do know about the social media industry, the players in it, and some of the shady stuff they do in order to benefit themselves and sell you their wares. So my focus rests, for now, on exposing these folks in an effort to help you make a more informed choice about whom you get your information from. Don’t worry. I’ll get to the VC people eventually. They’re not off the hook. I just need to do more research on them first.

Back to Tumblr …

Tumblr was founded in February of 2007. If you want to take Business Insider as a credible source of information,Tumblr was not profitable as of 2012. TechCrunch reported this weekend that Tumblr has three months worth of funds available to operate. In terms of the large amount of traffic Tumblr claims to generate, Gawker claimed back in 2011 that a nice chunk of that could be contributed to Tumblr’s porn and spam problem — a problem that the company acknowledged to an associate producer at NPR. (Although in their defense, according to BusinessWeek, the problem is not as big as it used to be.)

In April of 2013, Tumblr CEO David Karp stated that Tumblr still wasn’t profitable, but readily pointed out that there were more than 70 book deals and three TV deals that came from Tumblr blogs. Unless Tumblr received profits from those book deals, that doesn’t somehow make them more profitable. That’s like saying I own an ice cream store, and a couple of my customers who were once spotted by a casting agent there are now big Hollywood stars. It doesn’t really mean anything for my ice cream store; it’s just a thing that happened. Coincidentally, I’m pretty sure this is why Channing Tatum is a thing.

There’s a whole lot more to the Tumblr-to-book, Tumblr-to-television story that often doesn’t get told —a lot of which has nothing to do with Tumblr. For example, one of those TV deals and one of those book deals belongs to Emma Koenig. Were it not for the small footnote in the story The New York Times did on her, you would not have known she was the sister of Ezra Koenig, who sings for the popular band Vampire Weekend. The story also revealed that Koenig came from a wealthy family, is based in NYC, and was found by her editor after The Huffington Post featured her blog. Suddenly that “Tumblr-to-book deal” thing doesn’t seem so magical, does it? Sure, she used the platform, but there are other factors behind her story and those of numerous others that go beyond the use of Tumblr. (On a similar note: There’s also far more to Gary Vaynerchuk’s social media success story too.)

I don’t mention all of this to knock Tumblr. I actually like the service and used to use it. I mention this because we’ve now established that Tumblr, an unprofitable company for its entire existence, was acquired for more than a billion dollars, and that this unprofitable company was extensively promoted publicly by an investor who was simultaneously selling advice on how to use that company’s services in books, speeches, interviews, and videos.

While we’re on that subject, Gary Vaynerchuk also owns shares in Twitter, which is likewise disclosed on his website. Twitter is preparing to go public, although the timing of that is the subject of rumor at this point. It’s a bit harder to know if Twitter is profitable. There was a flare-up involving a statement that Fred Wilson, an early Twitter investor, had made that some took to indicate that Twitter was profitable, which he would then later clarify and say he doesn’t know if they’re profitable or not.

Here’s what we do know: Like with Tumblr, Gary Vaynerchuk was constantly and publicly peddling Twitter in his books, presentations, and interviews. At one point, he was encouraging The New York Jets, a client of his social media consulting firm, Vaynermedia, to start a trend among Jets fans to use a hashtag of #J_E_T_S_JETS_JETS_JETS on Twitter after every touchdown. Of course, if you’re a Jets fan, you know that your fellow Jets fans are mostly illiterate, racist, and don’t know what a Twitter is, but that’s beside the point. What is the point is that Gary was using his social media consulting firm, which sells advice including how to use Twitter, to encourage a multi-million dollar brand to use a company that he owns shares in.

Although these relationships are disclosed on Gary Vaynerchuk’s website, is that sufficient enough to inform consumers of his relationship with these companies? What about Vaynermedia’s clients? Are they told what social media platform the owner of this social media consulting service has a financial interest in? Can we reasonably assume that everyone who has ever read Gary’s books, listened or watched his interviews, seen his speeches, have in turn visited his website and saw that disclosure notice? Are his investments disclosed in those books and speeches?

You might be thinking, “So what?”, or worse still, the deeply cynical “the rich get richer.” You’re right on the latter, but I think this is bullshit. It may not be illegal, but consumers should be protected from potentially deceptive practices, and know who benefits from the information that’s being provided. Especially when it comes to social media.

B.J. Mendelson has sold 7,000 copies of his book on zero budget, helped get a television show into 40 million homes on ABC, and lives in and out of hotels across America. Contact him at BJ@BJMendelson.com. Contact the editor at devon@socialtimes.com. Image by Matthias Pahl.