Table of Contents
Table of Contents

Giphy: How it Works and Makes Money

For users of Facebook, Twitter, and other social media messaging sites, GIF images have become ubiquitous, and are increasingly used as a form of expression. For example, instead of using the Internet slang "LOL" for "laughing out loud," a user could attach a GIF video clip of someone laughing hysterically.

GIF is an acronym for Graphics Interchange Format, a popular bitmap image format introduced by CompuServe in 1987. Now, a company named Giphy is taking GIFs mainstream with its massive searchable database that attracts tens of millions of people each month. As GIFs grow in popularity among social media users and advertisers, Giphy is on the verge of becoming the next content media king.

Meta Inc., as Facebook's parent company is now known, liked the service so much it bought Giphy in May of 2020 for a reported $400 million and will roll it into its Instagram and Messenger platforms. However, due to potential antitrust violations, the two companies have been ordered to "operate as separate businesses" while the merger is under review.

Key Takeaways

  • Giphy is a company that provides social media and messaging platforms with animated GIF images that users can embed in posts and messages.
  • Facebook bought Giphy for a reported $400 million in May of 2020.
  • These platforms license the use of Giphy for its users. Giphy additionally seeks to capture advertising revenues.
  • The company has not reported any positive revenue yet to date, although it has raised tens of millions of dollars in venture backing.

How Giphy Works

The use of GIFs in social expression piggyback on the popularity of emoji characters, which are used to express whatever feelings a person might be having at the moment. Many of the GIFs that appear in social media are soundless, looped video clips of a character or scene from a TV show or movie, which can be much more expressive and dynamic than an emoji.

Giphy was founded in 2013 by Alex Chung and Jace Cooke, who decided to compile a database of GIFs that could be used in place of words to express feelings. The database and the number of users have grown significantly, with as many as 700 million users accessing more than 10 billion GIFs per day as of May 2020.

Users search for a GIF using a keyword and then choose from among the resulting images. They can copy and paste the image into a text message or share it on social media. Giphy recently came out with a mobile application for easier access on smartphones and tablets.

Giphy has also grown on the content creation side of the business. For example, individuals and businesses can now create their own GIFs on the Giphy website, which provides artists with tools to create dazzling GIFs with animations or video footage. Artist creations can be viewed on the site's art gallery.

Giphy also has a Giphy CAM app that lets users make their own GIFs with video footage recorded with their smartphone cameras. Users can easily upload footage to the site, where Giphy provides desktop tools for creating the GIF, and then seamlessly share their creations anywhere. In 2015, during the promotion of the latest Star Wars movie The Force Awakens, Giphy partnered with Disney to add a filter in the desktop tools that causes Star Wars ships to fly around in a video. Although no money exchanged hands for that particular arrangement, it becomes a little clearer how Giphy expects to generate revenue going forward.

How Giphy Makes Money

Giphy hasn’t generated any revenue to this point as it does not charge any money for the use of its apps nor utilizes an advertising model. The company is currently operating off the $150 million venture capital funds raised since inception. When acquired by Meta in 2020, Giphy was given a private valuation of $600 million.

In a 2019 interview with Digital Trends, the company founder shared, "the future is about Giphy bringing short-form entertainment into messaging." With 700 million daily visitors, Giphy has plans to expand into multiple platforms, including a video platform.

Between the search engine and the complete social integration of its content, Giphy should be an appealing prospect for content and advertising partners.

Article Sources
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  1. W3C. "GIF."

  2. Axios. "Scoop: Facebook to Buy Giphy for $400 Million."

  3. Facebook. "Facebook Welcomes GIPHY as Part of Instagram Team."

  4. Congressional Research Reports. "Facebook’s Acquisition of GIPHY: Potential Competition Issues," Page 1.

  5. Crunchbase. "Giphy."

  6. Giphy. "About."

  7. Giphy. "Introducing GIPHY CAM — The GIF Camera App for iOS."

  8. The Verge. "Giphy Cam Now Lets You Create Star Wars GIFs."

  9. Digital Trends. "The Man, the GIF, the Legend: An Interview with Giphy Founder Alex Chung."

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