Jun23
Can Giphy transition to a business model?

Can Giphy Make the Business Model Transition?

Posted by Guest Blogger

Gifs are as standard in the internet culture today as Tweets and hashtags. The short, auto-looping videos can be used to express virtually any emotion, and add a nuanced sense of humour, shock, or outrage to everything from current events to pop culture memes.

The ubiquity of gifs these days has come thanks in large part to the internet search engine known as Giphy. With more than 150 million users daily, Giphy creates, aggregates and organizes up to 2 billion gifs from all over the internet, allowing people to find just the right auto-looping clip for whatever they are expressing online.

You might expect that such a recognizable consumer-facing brand like Giphy would have a grandiose story of its origin. But actually the opposite is true. According to a post in Business Insider, “Giphy started four years ago as a side project of Alex 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.

Chung’s side hustle paid off, as gifs soared in popularity once there was a centralized database to find them. Today, Giphy has garnered $150 million in funding and has reached a valuation of $600 million.

Despite this rapid success, Giphy now stands in an interesting position. It has ample investment and interest, sure, but like many Silicon Valley companies, Giphy started without an implied business model. It successfully pursued the “eyeball economy” method—i.e. get lots of users to use your product and think about the money later—and now it’s looking for a way to turn those eyeballs into cash. In other words, Giphy has to find a way to go from a free service that users view as a search engine to a destination for entertainment that can be monetized in some way.  

As Business Insider reported, “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.” It went on to quote Chung: “These are people who are coming to us to just look at entrainment, TV, celebrities. They’re sitting and watching and spending hours just combing through the site.”

When it comes to picking a business model, Giphy has various options it is experimenting with. It launched Giphy Cam in the app store, which allows users to create custom gifs. In addition, it has experimented with creating sponsored gifs. It could also go down the avenue of placing ads in its search function and partnerships via licensing deals with popular networks and content creators.

But Giphy faces two problems that many successful Silicon Valley companies which don’t have a business model also face: How will users react when monetization comes into play? And will the money be enough? Though Twitter has implemented many monetization tactics like the ones described above, it still doesn’t have the business structure to move forward as a financially sustainable entity. Meanwhile, users berate it for making changes to the once ad-free service.

While the eyeball economy model represented a kind of golden era of the internet, you didn’t need a business model and a financial outlook; you just needed a good idea that would attract lots of users. In recent years, we’ve seen that model fade ever so slightly as massive companies like Twitter and Uber still rely on investment to cover costs. However, if they play their cards correctly. Giphy could very well be one of the last companies to successfully make the transition. We’ll just have to wait and see.

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