Giphy Closes $55M Series C at a $300M Post-Money Valuation | Hacker News Reader

Giphy Closes $55M Series C at a $300M Post-Money Valuation

techcrunch.com

47 pointsiamben58 comments

"The company acts a lot like Google, letting users upload and tag GIFs to make them searchable on the web and through Giphy’s native mobile apps."

"Shockingly enough, Giphy is not yet monetizing. That said, the $300 million valuation makes sense when you think of all the various and likely quite lucrative paths that Giphy could take toward revenue generation."

So many gems in this!

I'm honestly not sure if those were satire or not.

I'm pretty sure Techcrunch editors didn't think it was satire.

Given that Techcrunch is the Buzzfeed of tech news, that's what I assumed as well.

chickenfeed

You missed this equally sparkling gem (emphasis mine):

"The most obvious revenue stream could come from ‘ad words’, where a Giphy search could turn up sponsored content based on what the user was looking for. If it worked for Google, there’s no reason why it wouldn’t work for Giphy, and founder and CEO Alex Chung hinted on the phone that this would likely be the main source of revenue for Giphy when it decides to flip the switch."

It's the beginning of the end.

"Daryl: Look, this is a marketing campaign. You got nine days. Let's say you do get the money. What are you going to do with it?"

"Ryan: The first lesson of Silicon Valley, actually, is that you only think about the user, the experience. You actually don't think about the money. Ever."

~ The Office, Season 7 Episode 9

Whoa, $55M series c for a company with zero plans to monetize something that's very difficult to monetize? I must be missing something here. They must have incredible growth or something but even then what's the end goal? Ad words won't succeed on images (Google tried this twice; once with text and once with images[1]) so why do they think they will? Didn't imgur have a similar issue when people would just link to the image thus working around their ad placement anyway? imgur had to resort to pro subscriptions and creating their own social network of sorts where they could place sponsored content to make money[2] but where would either of those fit into Giphy?

I feel like I'm either missing something incredibly obvious that's going to make Giphy rich or...these investors are just throwing money away. I'm not sure which but it at least feels like it must be the former.

[1] http://www.cnet.com/news/google-adding-display-ads-to-image-...

[2] http://www.businessinsider.com/this-is-how-imgur-plans-to-ma...

Speaking of Imgur and ads, a couple years ago I noted that Imgur was covertly redirecting direct links to images on social media sites to the ad-filled versions: http://minimaxir.com/2014/02/moved-temporarily/

Apparently per recent comments on that article, they've extended that behavior to all websites, although I have not verified that yet.

Granted, there's no way Giphy could pull that off with their current integrations. But maybe I'm not sufficiently creative.

tax-related benefits?

"The most obvious revenue stream could come from ‘ad words’, where a Giphy search could turn up sponsored content based on what the user was looking for."

This is clearly an over-zealous editorialization by TC.

Google's AdWords program is the revenue generation monster it is because of the extremely high-intent of Google Searches.

Google's top categories (by cost per click) of search are weighted around insurance, mortgage, loans, attorneys, credit cards, etc.(1)

That's not going to happen at Giphy.

Way more plausible would be some sort of .gif pre-roll akin to Youtube ads, content sponsorship ("What's she wearing?" etc.

(1) http://www.wordstream.com/articles/most-expensive-keywords

So this was a ~20% raise, which is typical.

For Lightspeed et al. to return the vaunted 10x ($550M) that means Giphy would have to have a liquidity event at a valuation of 2.7BN.

Either that or they need to get revenue to some ungodly figure.

What am I missing here? Why are these funds betting this is a unicorn when according to everyone "VC funding is frozen."

VC funding isn't frozen. VC funding has cut multiples on high-growth companies to a fraction of their previous numbers. Giphy hasn't monetized, so the normal conversation about revenue multiples that's killing everybody else doesn't apply yet.

The likely thesis is that there WILL be monetization around gifs and gif sharing, and Giphy WILL be the company that dominates that. It's probably not hard to size that market as pulling in $1bil / year, so if Giphy points out they're the furthest along and the competition won't catch up, it's not an unreasonable bet.

Another way to think about it is to find things you don't believe in. For Giphy, that might look like:

- You don't think "gifs and people sharing gifs" is a trend that will last.

- You don't think it's possible to monetize gifs and sharing gifs, or at least the first company will screw it up so bad it tanks their business.

- You don't think Giphy is the clear market leader, or you think what they've done is easily replicated (incl. brand).

> "Giphy hasn't monetized, so the normal conversation about revenue multiples that's killing everybody else doesn't apply yet."

I keep hearing this kind of thing: that it becomes harder to raise once you start to have revenue.

Really?

A LOT of sales conversations (VC or otherwise) are about eliminating reasons to say no. Revenue is a hugely thorny subject, and getting revenue growth to look uncontentious is hard. You need high growth, low churn, lots of expansion, a plausible path to find new customers, and specifically for giphy, a story about why you couldn't monetize the entire market immediately (why do you need time to ramp up? hiring sales reps, implement the same feature on different platforms, what?). Lots of details, lots of speed bumps that would tank an otherwise compelling story.

On the other hand, it's not easy to sell without revenue, but if you find somebody who's a believer in the space, you've eliminated a TON of questions. So it's not easier per se, because a lot of investors will turn you down for not having revenue, but among those who say yes, there's no further questions, because there's nothing to dig into.

Well, before first revenues, it's a lot harder to determine the "type" of a firm, in the parlance of mechanism design theory.

Are some firms being gipped by revenue multiples heuristic? Maybe: if VCs are reading revenues as a type revelation mechanism but they're still a noisy signal. Cue in stories about having one's first low grades in college.

There is, ironically, a Silicon Valley episode where this is explained satirically [1]. That the person responding to you basically repeats this argument says something - not sure what exactly.

[1]https://www.youtube.com/watch?v=BzAdXyPYKQo

It probably becomes even harder once you have profit. You don't hear much about profit these days, especially on HN. That's reserved for real companies... oh, sorry, we call those "lifestyle businesses." You know, companies that actually make money.

>VC funding isn't frozen.

According to some high placed people at NEA it is.

A Series C where the post-money valuation is only 6x? The stock must be diluted as hell.

The Series B was $21M raised at $80M valuation (https://www.crunchbase.com/organization/giphy). I would not want to hold equity at this startup.

I can't believe they typed this with a straight face:

"So imagine if you wanted to send out “/giphy hungry” to your teammates and a McDonald’s GIF appeared, or if you sent out “/giphy monday morning” and a Starbucks GIF appeared."

In general, I have observed that technology people specifically tend to be a bit ad-phobic. And in their team channel they try to engage the their comrades and Giphy turns them into the channel that just dropped an advertisement into their chat stream? What if Victoria's Secret buys the keyword valentine? Who is at fault if someone says "/giphy Happy Valentines Day!" and Giphy turns that into a NSFW ad for lingerie which goes out to everyone?

I'll accept that perhaps I'm missing the point, and there is some value here that isn't visible to me, but for right now it really seems like a stretch to value this company as $300 million.

where do I sign?!

I'm using /giphy on Slack, and it's not even working well. 75% of the gifs I get presented for my keywords are not what I expected, at all. So basically I'm often disappointed and delete the message again to not annoy my colleagues.

I am speechless. If this is worth 300M$, I guess this script is worth at least 1/10 of that: https://github.com/github/hubot-scripts/blob/master/src/scri...

300M$ valuation with no income at all and the source of revenue being ad based, it sounds like something straigth from the Silicon Valley tv show

What do they do that requires so much money? (honest question)

Apparently it's really expensive to make Slack virtually unusable.

Comment of the week.

You win the Internet!

Seriously. There's an LA Tech Slack that I really wished was something other than an endless cascade of gif spam. I left it because I got sick of the red notification buttons making me head over to look for something about... I dunno... tech... and instead there's a dancing nut sack.

/giphy facepalm

They let you upload GIFs. And when you drag a file onto their website a cool background shows up that says, "Drop image here" with an overlay of a Nintendo Power Glove that follows your cursor around.

Ah, that reminds me of the internet of yore. I almost miss Geocities.

An army of Chinamen writing CSS.

accounting

I have a conspiracy theory.

The world actually ended in the year 2000. Jesus returned, struck down the antichrist, and all that, and the series was over. But the problem is that the series' producers signed a contract for ten seasons and they blew the big finale in season eight.

What do you do then? Why, you screw around. You write cheesy concept plots and play with breaking the fourth wall and do tie-ins with other franchises and all kinds of stuff. God's got his whole team of writers scouring the annals of post-shark-jumping shows looking for crazy plot lines to hold the viewership long enough to run out the clock.

Let's see... I got it! Let's make Donald Trump president of the USA!

Stuff like that, or dancing cat spam on Slack being worth more than what it would cost to put humans back on the Moon.

Here's one way to monetize.

Ads inside GIFs.

It's genius, really. Most GIFs are looping and are often watched several times. What if the service to which you upload a GIF injected an extra frame, lasting, say 40ms, that displays a subliminal advertisement. It would go by so fast that most people wouldn't notice. But then later they would get unexplainable cravings of the product that was advertised.

People are already tuning out the obvious ads, so subliminal ads are much more effective. Better yet, adblocking software won't be able to block such subliminal ads without blocking the entire GIF.

Content tampering is a surefire way to get users to leave to another service. Of which there are many.

There's also no way to control the negative content too.

Imagine someone creates a pro-ISIS beheading gif and Coca-Cola paid to slap an icon in the corner.

People are not "tuning out" obvious ads. If they're obvious then they are getting some attention, especially at the subliminal level you describe.

You are all missing the point, giphy empower matches on Tinder who never talk to each other to now converse without using words.

It has to be worth something.

I am legitimately unsure if this is sarcasm or not. Well done.

It was a "Jump to Conclusions" mat. You see, it would be this mat that you would put on the floor... and would have different CONCLUSIONS written on it that you could JUMP TO. I'm going to pitch this company and see if I can raise a $5M seed round, I mean, at this point, why not!

Um, I would bet good money that monetization will not be successful. This is a real moonshot.

Why has Google never tried to monetise Google Images results in the same way?

My instinct is that they have considered it but that image search lacks the same intent that makes AdWords clicks so valuable to Google.

Haven't looked recently but I think the Google Images API is really expensive to use.

I use Google images to do shopping all the time. Anecdotal for sure, but I can't be alone...

Google tried to. Twice. They tried with text ads and image ads. Neither works as far as I could tell. http://www.cnet.com/news/google-adding-display-ads-to-image-...

It's a fun product, but won't they run into copyright issues if it gets big? Seems like all the content is owned by others, and I'm not sure it counts as fair use.

Hence why part of the raise is likely reserved for potential legal fees.

Giphy really needs to improve their search engine IMHO!

Instead of embedding ads into GIFs, I think that Giphy can leverage its image tagging data to help brand owners track social media brand mentions. For example, Giphy could theoretically help Disney track usage and context of Mickey Mouse gifs, providing Disney insight into current public perception of their characters, allowing Disney to react if necessary.

I feel too bad right now for I had the exact same product ready and developed with a hell of a traction 4 years ago (for I have not seen the value in it back then), yet I dropped it for another idea that failed a 2 years later.

Giphy is definitely not the first GIF startup. And won't be the last.

You didn't know the right kind of morons to ask for funding from.

How is this even possible? Giphy is a running joke in Slack chat about how terrible it is.

And all these articles about unicorns and "watch out startups", and VCs decide to invest in GIPHY? I'm so confused.

Wow. Now at the C level without monetizing gifs?

Something tells me this won't last...

Huh.

I guess I just hope the founders took some money out in this round.

omg this is post-modern farce. who gets involved in this?!

--- https://www.crunchbase.com/organization/giphy/funding-rounds

Lightspeed Venture Partners

Betaworks ---

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