The Strategist

GIF-o-Phily: How Giphy Gained Popularity and Huge Investment

02/26/2016 - 14:43

Last week, GIF search service Giphy raised $ 55 million from venture capital funds Lightspeed Venture Partners, General Catalyst Partners, RRE Ventures and others. As a result of the transaction, the company was estimated at $ 300 million.
Giphy is a New York-born company. Its founder Alex Chung was previously engaged in art selling, and also has some experience in launching startups. One of them, the social network Fridge founded  with help of the prestigious incubator Y Combinator, was bought by Google in 2011. In 2013, Chung, along with a programmer Jace Cooke, thought up a «Google for GIF". The service became a resident of the US start-up incubator Betaworks. Now Giphy team sits in the Lower East Side, along with other companies developed with Betavorks’ support.

First, Giphy seemed to be ‘a terrible idea’. Media criticized the website for its questionable design: black background and a large palette of colors - while Internet giants tended to minimalism and used light colors.

"People were angry, because the site was too slow", - says Chung. However, this did not prevent him from quickly attracting the first million dollars from Betaworks (the studio also has a fund that invests in start-ups). Without any marketing, Giphy managed to attract 50 000 people a month regularly, so the service has been growning rapidly.

Lifespan of the Internet products is usually limited, and one format is quickly replaced by others. GIFs, however, are still not dead, and it is confirmed by a few facts. Twitter recently expressed desire to support GIF search in partnership with Giphy and Riffsy (mobile GIF search) – now users can look for images in the library directly in Twitter, and paste them into the tweet with a click. Giphy works in partnership with different social networks and services – their GIFs can be sent to Facebook, Telegram, Slack, Tinder, and other popular services as they have a special button to select the moving pictures from Giphy’s library.

Since Twitter has added GIF support in June 2014, these pictures have been shared by more than 100 million times. Tumblr’s home page has been featuring GIF tags for several years. In March 2015, the first Giphy bought a GIF sharing service Nutmeg, which was the company’s first step to conquer the mobile market.

According to Similarweb, 110 million users logged on the service's website in January 2016. This month, the company introduced a tool GIF Maker, which lets you create your own GIFs. To support the format, Google, together with Saatchi gallery, organized Motion Photography Prize award.

In the autumn of 2014, Giphy announced launching API for creating stickers, and signed a partnership agreement with the Japanese messenger Line a year later. Together, they released a series of animated stickers. With its help, API-developers can use free GIFs on their websites and applications. In addition, Giphy creates joint projects with music and movie studios and participate in the coverage of highlights. Giants such as Ralph Lauren and Juicy Couture have already tried the format. So far, Giphy has been doing it free of cost as the company is now interested in promotion of the format.

Over the past three years, the company raised nearly $ 80 million investment. Its main rival - a mobile GIF platform Riffsy – only $ 13,5 million. Jeremy Liew of Lightspeed Venture fund, which invested in Giphy, believes that "GIFs became mainstream". "This is a big trend. And if it is, you need to ask yourself, who is the leader? Giphy is a place where you can find any GIF, it makes the search much easier" - says the investor.

Now movie studios and sitcom producers turn to Giphy for advice - how to promote with the help of GIFs. Employees of studios make cuts from movies in the GIF format so that the audience could easily share them. Giphy has Giphy Cam application in which users can use "Star Wars" and "X-Files" filters when creating a GIF. In February, Giphy team showed important moments from "Grammy" ceremony using GIFs in real time. Even political consultants of Hillary Clinton dropped in Giphy office to consult on how to make a compelling video for the PR-campaign.

Now, Chung’s business is focused on growth rather than revenue. Like many start-ups, its main purpose is to grow up and appear on the new sites, where Giphy could reach billions of users. Exactly this became the ground for the company valuation at $ 300 million investment in the last round. Chief operating officer at Giphy, Adam Leibsohn said it was fair: "We started out as a search engine, then launched a tool for creating GIFs, now we also have wide distribution channels."

In future, Giphy is going to monetize the service selling licenses for the content, as well as with help of advertisers who will be able to target ads to specific people. For example, a user can enter the word "detective" and see the first footage of the new HBO series.


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