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.

Pet Holdings is constantly on the lookout for new memes, and it's constantly finding reasons for why things won't work. Huh declined to name specific ideas he's rejected, but he offered a hypothetical example: "Say there was a giraffe-necking site—beautiful pictures of these peaceful creatures, intertwining their necks, in love. And this site has lots of these photos. Fantastic, right? Maybe it becomes a meme, maybe people love these photos and it becomes viral—we'll still pass on that." Why? "Because there's only so many ways a giraffe can neck," he says.

Most memes we encounter online are such one-trick giraffes: If you've seen one instance of Rickrolling or a Mentos-and-Diet Coke geyser, you've pretty much seen them all. For Huh, the best Internet memes are like daytime soaps—endlessly flexible and full of dramatic possibilities. For instance, the idea behind GraphJam first came into being around song lyrics (a pie chart showing things that Rick Astley would never do, with the biggest slices representing "run around and desert you" and "give you up," appeared online about a year ago). But over time, people moved beyond music and began making graphs to describe the dangers of wearing Snuggies and why people write "first" in Web comment threads. "We've noticed that the best memes shed one audience while gaining an even bigger audience," Huh says. As they mutate from the specific to the general, they also leave the territory of fads and become cultural touchstones.

Pet Holdings is keen to expand. The company just launched Tofulator, a site that allows people to add captions to YouTube videos, resulting in bizarrely hilarious mashups. It's also working on a way to find the funniest things that people are talking about on Twitter. The project, called Son of a Tweet, is still in development, but the goal is to build a "poor man's Digg," Huh says—a way to collect the Web's best content without having to handle hundreds of thousands of voters and commenters.

When I told Huh that I wanted to write about him, he feigned reluctance—what if a prominent article describing his success spawned a competitor? But then he explained that it would actually be very difficult for a new competitor to take on Pet Holdings because it sat on a huge competitive advantage: a meme portal. By now his sites are big enough that when Huh spots something buzzy, Pet Holdings can quickly replicate the idea and then make it popular through links from Cheezburger, Fail, and his other blogs. Pet Holdings is not shy about copying successful memes outright. Last year the company was in discussions to buy Engrish.com, which has been compiling funny translations for years. When negotiations didn't work out (Huh didn't explain why), Pet Holdings started a competing site, and now it's almost as popular as the original. Huh says that he prefers to buy sites than to copy them, especially when established sites have a devoted audience that can proselytize an idea. There are, though, few legal implications to copying good memes—because such sites traffic in user-generated content that's amorphously defined (does lolrus infringe on lolcat?), it's difficult to trademark memes.

What's the next big thing for Pet Holdings? The company recently "seeded the Internet" with about a dozen memes that Huh won't reveal; the plan is to see which ones succeed organically, without links from the Pet Holdings' network of sites, and then to invest resources in developing those ideas. "That's the most interesting thing about this job—when people find out how big we are," Huh says. "They're like, Cheezburger's yours, and Failblog, holy crap! And then they're like, It's more than just you? They don't understand the scale of this. It's a proper sweatshop."

Farhad Manjoo is a technology columnist for the New York Times and the author of True Enough.

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