Inside the GIF factory: How Giphy plans to build a real business by animating the internet

Plenty of tech startups dream of building a new consumer
brand that’s used and recognized by hundreds of millions of
people every day.

Few of them get as close as Giphy, the four-year-old GIF search
engine that’s raised $150 million in funding to date at a $600
million valuation.

Giphy’s mission is to evangelize and proliferate the world
of GIFs — those micro-videos and animations that
replay continuously in an endless loop and have become a
standard means for expressing humor, shock or affection in
news feeds and message threads across the world.

What started as a simple web crawler for finding GIFs now
serves more than two billion of the auto-looping clips
every day to more than 150 million daily users. The
company recently started experimenting with standalone apps like

Giphy Cam
, which lets people create their own silly GIFs in
seconds.

Giphy isn’t profitable yet. In fact, the company doesn’t
even have a reliable means of generating revenue at
this point. But now that GIFs are an ingrained aspect of online
behavior, the company is hard at work drafting a
blueprint to turn its popular service into a money-making
business. 

CEO and cofounder Alex Chung tells Business Insider that his
70-person team is kicking around “over a dozen different
business models” that it may implement. Central to the effort is
Giphy’s move to evolve from being a search engine for GIFs
into a hub for what Chung calls “micro-entertainment.”

“We are a platform for everything short-form, from communication
to entertainment,” Chung said during a recent interview at
Giphy’s newly-opened headquarters in New York City’s trendy
Chelsea neighborhood. “The future model is going to be jumping
between the two.”

More than just the Google for GIFs

Giphy started four years ago as a side project of Chung’s while
he was a hacker in residence at New York startup incubator
Betaworks.

By scraping sites like Tumblr for GIFs, he quickly realized that
there were few quality GIFs on the internet, and most
of them were low resolution.

“It’s like if Google had indexed the internet and found out there
were only a few webpages,” he said. “Most of them were
pretty much garbage. There was a bunch of not-safe-for-work
stuff.”

So he started quickly building a team that could chop down all
kinds of content, from TV shows to sports games, into GIFs. Now
Giphy licenses content from a wide swath of content
providers, including HBO, the NFL, and CBS. Last year, it opened
a production studio in Los Angeles to make its own GIFs and GIFs
for outside partners.

Giphy’s natural habitat remains messaging, as GIFs ricochet
across platforms like Apple’s iMessage and Slack, the work chat
app that has integrated Giphy functionality. Search the word
“hungry” in Google and you’ll see bland dictionary definitions
and famine reports. But “hungry” is one of Giphy’s top
search terms.

“We kind of branded expression search,” said Chung. “No one even
thought about searching expression, it wasn’t a thing.”

Slice and dice

After Giphy.com started adding standalone pages for events
like New York
Fashion Week
and shows like “South Park,” Chung and his team
noticed another behavior. People weren’t just coming to
Giphy to find a GIF and leave. They were coming to be
entertained.



Giphy CEO and co-founder
Alex Chung.

Getty

Now 50% of the visitors to Giphy’s website are coming to just
browse and watch GIFs, according to Chung. And people watch more
than 4 million hours of GIFs through Giphy every day.

“These are people who are coming to us to just look at
entrainment, TV, celebrities,” he said. “They’re sitting and
watching and spending hours just combing through the site.”

What happens if Google wakes up to GIFs and decides to do a
better job of featuring the mini-clips within its search page?
Chung said he’s not worried. 

“We’re years ahead of everyone and we have the brand and
partnerships. We’re the Google here,” he said.

The company has also made strides in producing GIFs, saving money
and time by developing what is effectively a GIF factory that
churns out a steady stream of self-looping clips. Every episode
of the popular Netflix series “Gilmore Girls”, for example,
is pumped into an array of PC rigs which dice and tag
the content into thousands of GIFs. Each of these GIFs redirects
to Netflix’s website when a viewer taps.

Make GIFs first, make money later

One thing Giphy hasn’t figured out yet is how to make money. But
after raising
$72 million in additional venture capital funding last fall
,
monetization is being talked about more seriously internally.

“It’s definitely something that’s become more of a priority at
the company,” said investor Spencer Lazar, who led General
Catalyst’s participation in Giphy’s Series B, C, and D
rounds of funding.

“Anyone with a huge network of engaged users who are searching
for things has an opportunity to build a business on top of
that,” said David Rosenberg, who leads Giphy’s business
development efforts. “Exactly how we slice it, that’s what we’re
thinking about now.”

There are the obvious ways Giphy could monetize: ads in search,
sponsored GIFs, and licensing deals with content providers like
Netflix that agree to have their shows sliced into millions of
tiny GIFs. Giphy has already experimented with creating sponsored
GIFs — last year it made a GIF ad for the NBC show “Superstore”
that was displayed on a giant screen in the World Trade
Center. 

“It’s not like we’re allergic to the notion of taking money,”
assured Rosenberg.

But Giphy is still very much in the
try-everything-and-see-what-sticks phase of its growth. Last year
it acquired the sticker messaging app Imoji, which it turned into

an animated sticker app
that lets you place GIFs on top of
stickers. A software development kit that’s in the works will
allow developers of all sizes to quickly integrate Giphy’s search
engine into their apps.



The
Giphy Cam app lets you create goofy GIF captions out of what you
say aloud.

Giphy

When Facebook debuted its
new camera interface and augmented reality platform
at its
annual developer conference last month, Giphy was one the
first outside partners. Its app
Giphy Says
can create looping GIF thought bubbles with
captions based on what you speak into your phone’s camera.

None of Giphy’s standalone apps have been commercial hits. Giphy
Cam, for example, hasn’t ranked in the App Store’s charts since
it debuted in October 2015, according to analytics firm App
Annie.

But Giphy maintains that its many experiments are just that:
experiments intended to inform the company’s overall direction.

“We can test to see if these products are interesting enough to
put into the main product,” said Chung, referencing the search
engine. “And if it’s good, we’ll bake it in.”

“You do not get to build the massive business that we’re going to
build without being maniacal about user experience and product
for years and years,” said Rosenberg. “I think we have a
meaningful chance of being the next American tech consumer
company that your grandma hears about.”

For Lightspeed Ventures partner Jeremy Liew, Giphy will succeed
because of how it’s become almost synonymous with the word GIF.
Liew said he invested in Giphy for the same reason he invested
early in Snapchat: both are about making communication more
visual and expressive.

“If you become part of popular culture, you always figure out a
way to make money,” he said.