Pet Holdings, the company behind lolcats and Failblog, tries to turn memes into money.

Innovation, the Internet, gadgets, and more.
March 20 2009 6:17 PM

I Can Has Internet Millions

The company behind lolcats and Failblog tries to turn memes into money.

For the Web's cognoscenti, the lolcats fad is so over. I Can Has Cheezburger, the site that sparked captioned-cat-picture mania, launched in January 2007. The online world's early adopters learned about the phenomenon that February, when Boing Boing first linked to the site. Over the next few months, lolcats showed up in Gawker, Slate, the Wall Street Journal, and Time. Last October, Eric Nakagawa and Kari Unebasami, the site's founders, published ICan Has Cheezburger?: A LOLcat Colleckshun, a book that spent 13 weeks on the New York Times' paperback best-seller list. Lolcats are now even showing up on hipster soda bottles. Is there anyone left in America who hasn't had enough of these cat photos appended with ironic, allusive, peculiarly spelled captions?

Yes—lots of people. More than two years after its launch, I Can Has Cheezburger is still having cheeseburgers. Not only hasn't it faded, the site is bigger than ever: People keep sending in new pictures, new people keep discovering the phenomenon, and every day traffic grows a bit more. In the last year, according to the traffic-monitoring firm Compete, visits to the site  more than doubled. About 1 million unique users now land at I Can Has Cheezburger every month, and its growth shows no sign of ebbing.

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Most surprisingly, lolcats makes money. A few months after they started the site, Nakagawa and Unebasami sold it to Pet Holdings Inc., a Web startup based in Seattle. Pet Holdings markets memes: In addition to I Can Has Cheezburger, the company also runs Failblog, which collects photographic instances of spectacular flops; Engrish Funny, a chronicle of poorly translated signs; GraphJam, in which people try to distill life into PowerPoint-type slides (such as "Relationship Between Money and Problems," an ascending, 45-degree line graph); and Once Upon a Win, a trove of awesome, faddy things from the past (friendship bracelets, Teenage Mutant Ninja Turtles, videos of Weird Al). Pet Holdings didn't invent any of these ideas. Instead, it sifted through the daily river of ephemeral Internet buzz and bought or built sites around the few memes that seemed to possess universal, permanent appeal. In the process, the company has managed something that few others online—not even YouTube—have been able to pull off. It turns memes into a profitable business.

Pet Holdings was founded in 2007 by Ben Huh, a journalist-turned-Internet-entrepreneur who, like lots of people in 2007, had become enchanted by lolcats. Huh was amazed by the site's rocketing growth (traffic was doubling every month). Even better, I Can Has Cheezburger seemed to be developing a passionate community of regular readers and cat-picture contributors, which Huh took as a sign of its enduring prospects. Huh, the sort of person who makes friends easily with strangers online, struck up an instant-message-based rapport with Nakagawa. He also pitched a few angel investors on a plan to buy Cheezburger and make money from advertising. "The pitch was that this was about humor and not all about cats. It's a lot about cats—but there was more opportunity there," Huh says. "People were like, So, are you going to create a dog site and a chicken site and a giraffe site? I was like, It's entirely possible that we may go into hippos, but it's more likely that we'll branch out into something else." With the angel investors on board, Huh made an offer to Nakagawa over IM. He took over the site late that summer.

There is still no lolhippos, but Huh added loldogs, lolcelebs, and lolnews (and of course, there is the saga of a heartbroken walrus and his missing bucket, lolrus). He started Engrish Funny in January 2008 and bought Failblog from its founder that April. When Huh founded the company, Cheezburger got an average of about 500,000 pageviews a day. Now, the Pet Holdings empire gets about 5.5 million daily pageviews, making it one of Web's the most popular blog networks. The company has a full-time staff of 10 developers, designers, and administrators. Most of the sites' content—the cat pictures, the FAIL videos, the Engrish signs—are contributed by a vast, devoted community of regular readers, a business model that scales well and helps Pets' bottom line. Huh says that the company is profitable and has been growing during an otherwise grim time for the advertising market, though he notes that "profitable" doesn't mean "cash cow." "Right now, it's not like printing cash—far from it," he says. "I work out of a 6-foot-by-6-foot server closet with no windows. We're conserving a lot of costs to stay profitable, but it's certainly a growing business."

Still, Pet Holdings' feat is remarkable considering the transience of Web memes. Like all pop-cultural phenomena, most specimens of Internet buzz burn bright for a short while then fade away quietly. Some memes burst so fast they become reviled, eliciting embarrassment on the part of anyone who took part. Many years later, Mahir and the Hamster Dance seem about as respectable as "U Can't Touch This" and "Ice Ice Baby"—people were into that, really? Somehow, so far, Pet Holdings has managed to avoid investing in any such short-lived memes. Lolcats and Failblog touch on timeless themes—the everlasting hilarity of our feline friends and the addictive thrill of random schadenfreude. "Failblog will go on for eons," Huh says. "As long as there's a human being left on the planet, Failblog has material." If there are two humans, it will have an audience.

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