For those who don't know, Tumblr was removed from the app store because cp was found on it.
They could've got rid of the cp and hired moderators, but banning porn itself and using laughably bad detection programs will turn it into livejournal 2.0. The execs don't want to hire the moderators necessary to keep the platform safe from abuse while still competitive.
Given a choice between hiring so many people that they certainly lose money or taking an unpopular decision and risk losing money, there's only one choice for them. For better or worse, Rule 34 rules the internet.