Biz Insider

How Does GIPHY Make Money?

Executive Summary:

GIPHY allows users to share, save, and discover GIFs and digital stickers as well as videos.

GIPHY earns money by helping to promote and create sponsored GIFs. Sometimes, the content is created in collaboration with GIPHY’s own design studio.

GIPHY was launched in 2013 and has since grown to be one of the most popular websites on the internet. It has raised more than $150 million during its existence.

What is GIPHY?

GIPHY, a social platform that lets users share, save, and discover GIFs and digital stickers as well as videos, is a search engine and social platform.

Searching a term or set terms on the platform will help users find the content they are looking for. This search can be done via giphy.com, as well as downloading the mobile app (available both for Android and iOS).

GIPHY also displays trending clips, as well as videos from popular artists and channels. You can save a GIF/video you like to your favorites and share it on social media.

You can also make your own GIFs or stickers with your phone camera. Similar to Snapchat, the app offers users a variety of facial filters.

GIPHY also promotes the top-performing artists and invites other businesses for them to be hired.

Software developers can also access GIPHY’s rich content library by connecting to the SDK or API. This allows them the ability to display GIPHY-based content in their own applications.

GIPHY’s Story: The Company History

GIPHY is a New York City-based company founded by Alex Chung (CEO), and Jace Cooke in February 2013.

Cooke and Chung, both from technical backgrounds, met for brunch in 2012 to share their ideas.

They all referred to the same theme: it was difficult to find certain GIFs back in those days. This functionality was not available to search giant Google.

They are both tinkerers by nature and spent the next few months creating a tool to search the internet for GIF files. They began by downloading GIFs from other websites, manually labeling them and indexing them.

Ironically, the original tool name was Gifgle. This was an abbreviated version of GIF Google. They decided to rebrand it as GIPHY due to copyright concerns.

GIPHY was originally designed to allow Chung and his friends to share GIFs. He presented the tool to his friends on February 1, 2013, and they secretly shared it with tech publications such as Gizmodo, Mashable, and others.Wayback Machine

GIPHY attracted over a million visitors in a matter of days and then grew to 300,000. Chung and Cooke realized they had something special.

National exposure enabled the team to join Betaworks, a pioneering funder of Kickstarter, for office space and $1 million in seed financing.

GIPHY focused its efforts on growing its features and hiring its first employees in 2013. The platform included screensavers, artist profiles, and a quasi-integration to Twitter and Facebook. It also offered a link shortener that allows for greater shareability.

The first year was spent educating people about how to search for GIFs on their own website, and not Google or other search engines. It also aimed to increase the number and quality of GIFs available on its platform.

One of the main drivers was to help artists gain exposure. Subway, for example, approached GIPHY to discuss a possible collaboration. It connected Subway with an artist, all without any cut. This encouraged artists to sign up for the platform, which led to an increase in GIF output.

In May 2014, a Series A funding of $2.5 million was granted to the company for its continued platform expansion. Cooke, the co-founder of the startup, had left by this time to pursue other ventures.

In October, GIPHY’s engineering team laid the foundations for the rapid growth it would experience over the next months and years. GIPHY files were made available to other developers via the platform’s API. Users could then post GIFs to platforms such as Telegram and Slack .

GIPHY secured $17 million more in January 2015 to expand its API product and make it available to more partners. GIPHY, a two-year-old startup, was valued at $80million in the round. GIPHY was also able to acquire its first acquisition with the funding. GIF messaging app Nutmeg was acquired by GIPHY for an undisclosed sum in March.

GIPHY’s own messenger product, GIPHY+ Messenger was launched just days after the takeover. It integrates directly into Facebook Messenger and allows users to send GIF or text-based messages.

GIPHY continued to work with other platforms such as LINE and Google’s Gmail throughout 2015. GIPHY also continued to experiment with new product launches in an effort expand its user base. It launched its GIF Maker software and GIPHY Camera in October. These products allow users to create and share GIFs with their phones’ cameras.

GIPHY’s third round of funding was announced in February 2016. The company raised $55 million in Series C funding at a post-money value of $300 million.

GIPHY announced that GIPHY studio was launched in Los Angeles. It was headed by Nick Weidenfeld, creator of Adult Swim. The studio’s purpose was to produce content that could be used in conjunction with other brands.

GIPHY, for example, partnered with NBC to install 19 LED signs in New York’s World Trade Center’s transportation hub. They also endorsed the network’s newest sitcom Superstore. GIPHY would work with customers such as Converse, FOX and Nike throughout 2016.

The platform reached the milestone of 100 million active users per month. Another funding round was made possible to reward the platform’s rapid growth. GIPHY was valued at $600 million by investors Draper Fisher Jurvetson and other investors in October.

GIPHY expanded in 2017 and 2018, much like previous years. GIPHY also partnered with platforms such as Viber, Instagram, Vimeo, and Vimeo. Unfortunately, not all its partners were happy with the firm’s services.

After a racial slur was accidentally added to GIPHY’s sticker collection (which was launched in March 2017), both Snapchat and Instagram deactivated their GIPHY connections. GIPHY quickly reacted by removing the photos in question and enhancing its content moderation. It was back within a month on both platforms.

Other than this incident, there was nothing else noteworthy. For the growth of the business, partnerships remained a major focus. GIPHY, for example, announced integrations with TikTok’s Twitch and Amazon’s Twitch .

GIPHY also continued to experiment with new products in the hope of making them viral. It unveiled the GIPHY Celebrity Detector machine learning model in March 2019. This was able recognize thousands of faces in GIFs and recognized them. GIPHY Arcade was launched in October 2019 by the company. This allowed users to play fast games with GIF characters.

Rumours began to circulate about GIPHY being a possible acquisition target after the site experienced a temporary but significant increase in traffic due to the coronavirus pandemic. These rumors were triggered by Facebook’s announcement in May 2020 that it had acquired GIPHY for $400 Million.

Both companies had been involved in various integrations over the years and held talks to acquire each other back in 2014./2015. GIPHY raised $21.5 million in Series B to keep its independence.

However, the purchase price was a significant decrease from GIPHY’s high. In October 2016, the company was valued at $600 million by investors. The company’s inability build a sustainable business and therefore relied on venture capital to keep operating. This led to a decrease in its valuation.

The acquisition price was not the only negative news. Just weeks after the announcement, UK’s antitrust watchdog Competition and Markets Authority (CMA), announced that it would investigate this purchase.

Facebook did not inform any regulators of its intent to acquire GIPHY. It used a legal loophole in order to avoid these reporting requirements. It paid an existing investor a dividend, which significantly reduced GIPHY’s assets so that they were not required to report the deal.The Top 10 Business Podcasts

Facebook and the CMA exchanged emails throughout 2020 and 2021. The CMA is currently attempting to sell GIPHY to Facebook, as it fears it will significantly affect competition in the UK. Expect a decision to be made in October 2021.

How does GIPHY make money?

GIPHY earns money by creating and promoting sponsored GIFs. This content is promoted either on its own platform, or on other digital and analog channels.

GIPHY’s sponsorship revenue is likely to be paid per-campaign. GIPHY may be paid $1 million by a brand such as the NFL to create customized GIFs, and have them promoted across multiple platforms.

Brands themselves gain additional exposure. Millions of people are likely to see the content on the platform and its many third-party integrations.

GIPHY was naturally also exploring other advertising options. GIPHY had considered keyword-based advertising in the past. CEO Chung frequently cites Google as an inspiration. Brands would appear when someone searches for keywords such as food or gym.

None of these considerations have been realized to date. The company has so far remained focused on US-based brands and campaigns.

GIPHY Funding & Valuation

Crunchbase reports that GIPHY raised $150.9 million in four rounds of venture capital funding.

General Catalyst and Lightspeed Venture Partners are some of the most prominent investors.

GIPHY currently has a value of $400 million, at least according Facebook. The company was acquired in May 2020.

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