If you worked on the editorial team, it was a death spiral for you even if the rest of Tumblr went on to a big exit. (And off-topic, but: I bet those folks who used to work on the editorial team are cheesed they got canned right before the big payday.)

I have no knowledge of Tumblr's internal workings, but I would bet if you talked to the folks who used to be on that editorial team they'd have stories of their own budget being squeezed in trivial ways before the layoff. Laying people off is hard, managers don't like to do it, so they almost always look for other ways to save money before biting the bullet and canning people. And when management decides that a particular division isn't critical to the overall business, it's typical for the bean-counters to be unleashed on that division to look for "economies" that other divisions more beloved by management don't have to bear.