Users already follow tumblr blogs that cater to their interests. Tumblr already knows I follow a Pokémon-themed blog, a How To Train Your Dragon-themed blog, and the official blogs for Instapaper and Apple Music. And Taylor Swift.
Based on those interests, Tumblr should be able to sell ads for, say, the new Pokémon mobile game or Taylor Swift's new concert film (premiering on Apple Music), or whatever. It shouldn't matter whether or not I click or do anything actionable on those ads; what matters is that I see them. It's like television ads in that respect: you're paying to get your message out to a group of people.
So yes, tumblr advertising is currently quite ineffective. But it doesn't have to be.
Tumblr's just not a place you go when you're thinking about buying stuff. If it doesn't work organically it's not going to work when you bring corporate ads in. Yahoo bought it for display ad inventory and then, oops, the bottom dropped out of display ads.
I'll agree that the largest part of tumblr's userbase doesn't have the ability to whip out the credit card at the drop of a hat. I'll argue that TV is also not a place you go when you're thinking about buying stuff, yet display ads seem to be working there.
I'll also add some sympathy for that Etsy seller. I have a friend with an Etsy shop, and the bane of her existence is people reblogging a card or print with no link back (or worse, "google images" listed as the source).
Also the fact that tumblr blogs look like they came straight out of 2006. We have mainstream 24-27inch screens with 1920 horizontal pixels now. Why do most tumblr blogs look like geocities-era thin vertical strips of annoying gifs filled with tiny blocks of hard to read text?
edit: also being lazy.
Case in point of some people who get it: medium.com
To use a Tumblr-relevant phrase with tongue only slightly in cheek: check your privilege :)
That's what happened to Flickr... see http://gizmodo.com/5910223/how-yahoo-killed-flickr-and-lost-...
> The Flickr team was forced to focus on integration, not innovation.