• by Mark Walsh  @markfwal, July 18, 2014

Whether Yahoo’s $1.1 billion acquisition of Tumblr will pay off remains to be seen. But in the year or so since it purchased the blogging platform and social networking site, it has become more of a mobile acquisition. Most of Tumblr’s monthly traffic now comes from mobile devices, compared to only about a third when it was bought by Yahoo in May 2013.

During Yahoo’s first-quarter earnings conference, CEO Marissa Mayer said Tumblr’s mobile engagement in the first quarter had more than doubled (up 122%) from the year earlier period. This week, during the company’s second-quarter earnings call, Mayer highlighted increased efforts to monetize Tumblr by extending its native ad unit across the Yahoo network, including mobile.

She also said that Tumblr had been a “critical acquisition” for Yahoo, providing a publishing platform for brands and editors and bringing a social aspect to the Web portal.

The problem is that Tumblr’s audience in the U.S. the largest ad market, isn’t growing. It’s actually declining, according to comScore figures.

While the number of mobile monthly visitors has increased to 25.7 million in June 2014 from 19.8 million in the year-earlier month, desktop traffic has slipped from 36.1 million to 23.3 million. That’s left Tumblr with an unduplicated, cross-platform audience of almost 43 million in June, compared to 46.6 million a year ago.

Tumblr hasn’t disclosed the number of registered or active monthly users it has. It does say on its site that as of July 1, it had 195 million blogs, up from 108 million when it was acquired by Yahoo in May 2013. It also adds 94.3 million posts a day versus 75 million a year ago. But what is all this adding up to?

As an analogy, Twitter has reported increased engagement this year, but its stock has come under pressure from investors because of slowing user growth. As part of Yahoo, Tumblr doesn’t face the same level of scrutiny it did as an independent entity. But as the company’s biggest acquisition under Mayer, it will have to demonstrate that it’s paying off. So far that hasn't happened.

“Not only has even a modest level of revenue from Tumblr seemingly failed to appear, but display shortfalls were more pronounced, too,” noted Brian Wieser, senior analyst at Pivotal Research Group, in a research note this week on Yahoo’s second-quarter earnings. Yahoo would likely protest that it’s still early days when it comes to monetizing Tumblr, and it’s loath to ruin the user experience with a flood of sponsored posts.

Tumblr’s shrinking U.S. audience won’t help convince online marketers typically looking for scale to start spending on paid placements. For an emerging social property like Tumblr, strong growth would be assumed to be part of the package. Given the transition of its audience from desktop to mobile, it needs the mobile momentum to pick up to overcome the loss of PC traffic. It doesn’t want the mobile shift to be a downward shift.