Growing a business sometimes requires thinking outside the box. March 21, 2016 This story appears in the April 2016 issue of Entrepreneur. Subscribe » Free Webinar | Sept. 9: The Entrepreneur’s Playbook for Going Global Register Now » 15+ min read Tyler Menzel watches television or movies or cable news, and he no longer sees what regular people see. He filters for the magical few seconds — a woman’s uncontrolled smirk, a man’s harrumph, a candidate’s shrug, the briefest of experiences that are, all at once, visually comical and expressive and entirely relatable. He’s trained himself to do this by being editorial director at Giphy, the fifth employee the company hired three years ago. His team used to be one person: him. Now it’s six people. By the end of this year, it’ll be 16. And like him, they will all have an eye for the overlooked. An eye for the moment. And they will transform that moment into a gif.For the uninitiated: You’ve seen a gif before. It’s a looping image used across the internet — the thing that isn’t quite a video, that has no play button and no sound, that repeats until you look away. It’s lingua franca on social media. It’s on the New York Times homepage. It is silly and rudimentary and yet widely beloved, emailed and texted alongside emojis and emoticons. The gif’s inventor, Steve Wilhite, insists it is pronounced “jif,” like the peanut butter, but don’t you dare say it that way. The internet at large uses a hard g, like “gift.” Case closed.The Giphy team Giphy has a big idea: It wants to be the brand that owns the gif — that becomes synonymous not simply with a particular product or service but with the digital thing itself. Crazy? Maybe. It’s certainly an enormous branding challenge. But YouTube managed to own “internet video,” and Google owns “internet search.” Giphy already has a robust, searchable database filled with millions of gifs that it adds to daily, and has created tools so anyone can easily create clips and add to the collection. It has drawn in nearly $79 million in investments, and gets 500 million monthly page views on its websites and billions of views of its gifs. The company reportedly turned down a big acquisition offer from Facebook. So, maybe not so crazy.But none of this is possible without the moment.Tyler Menzel, Editorial DirectorHere are the lengths that Giphy goes to in order to capture that moment. The company has begun live-giffing (or is that giphing?) events — converting memorable seconds from live TV into instantly shareable gifs. This year’s Golden Globes was an all-hands-on-deck situation. Giphy sent two staffers to L.A. to work inside Entertainment Tonight’s production booth, while four others were perched at their office computers — three in Giphy’s Manhattan headquarters, and one in Laguna Beach. They were hunting. Waiting. Anytime they spotted a moment that the internet might enjoy, they spliced it, tweeted it and uploaded it to the site. Things were going fine. There were some OK moments, but nothing stood out. And then while Lady Gaga was walking to the stage to accept an award, looking very self-serious, she bumped into Leonardo DiCaprio. The actor looked up. He was startled, and then, for a split second, his eyes bugged and — wait, what was that? Indignation? Condescension? It happened so fast. “And it was such a small moment. It was such a small moment. But as it was happening, I saw it and was like, That’s not only a gif, that is the gif of the night,” Menzel says. Super Bowl winners have spoken with less enthusiasm than how he relays this story. “As I was cutting it, I couldn’t even explain the moment. I was telling the team, ‘I can’t explain what I have, but I have something great. Wait until you see this. This is going to be good.’” Within seconds, he’d created the gif. The internet hurtled forward. The five-second loop was viewed 50 million times and became the most talked-about moment of the night. Days later, DiCaprio told Vanity Fair that he’d seen the gif, had laughed at it, but remained perplexed by the whole situation. “I guess I’m of a different generation now,” he said. “I have no idea where this stuff comes from or how it’s even captured.”He’ll learn soon. Giphy’s moment has only begun.Let us pause for this important consideration: What the hell is going on here? Why are gifs so desired? So pleasurable? How is it possible for gifs — for the very concept of gifs — to be a business opportunity? It’s not as if anyone will pay to see a gif, at least not any more than they’ll pay to see a JPEG or a PDF or any other standard file format. And that’s all “gif” is, to be clear: It is a type of file. Entrepreneur.gif — there’s the name of a file that might show us all scrambling to make this magazine by deadline, then scrambling to make this magazine by deadline, then scrambling…and so on, endlessly looping. “Gif” stands for “graphics interchange format.” Snooze-fest.Giphy’s top guys — CEO Alex Chung and COO Adam Leibsohn — are eager to indulge these questions. We’re inside their office, a typical startup space with long tables of computers, glass-walled conference rooms and two dogs running around. “Ludwig Wittgenstein was a philosopher who had this language theory: Words are really, really good at literal things but really clumsy at abstract things,” says Leibsohn. (Non-spoiler alert: Both he and Chung were philosophy majors.) And Wittgenstein felt that this limited people’s ability to communicate. But what were we going to do, make another limited language? No.Today, roughly 60 years after ol’ Ludwig fell fatally ill (doctor: “You’re going to die within days”; patient: “Good!” — that’s the tale, anyway), the world has, in fact, developed totally new ways to communicate. “And you realize the trick to getting out of the problem he proposes is not language; it’s visual,” Leibsohn says. Selfies. Gifs. Memes. This is how digital natives express themselves. “So when you start to pull content from culture, you can use the content to express yourself, and it opens up the variety and the nuance of any of those bigger thoughts. ‘I love you’ can be cute, funny, sarcastic, mean, tongue-in-cheek, romantic, passionate — you can’t get that in just saying, ‘I love you,’ but if you can find the right gif in the right moment, you have something immediately understandable.”Jess Gilliam, Studio Creative DirectorIn 2012, Chung and a friend, Jace Cooke, were at brunch geeking out over this kind of stuff and realized there was no good way to actually find gifs. Google didn’t have a search function for them. So Chung, who had worked at many startups and MTV, spent a few months building a tool that scoured the web for the files. He called it Gifgle (like, you know, gif-Google). “Then I thought, This is dumb. We’re going to get sued,” he says. So he changed it to Giphy. In January 2013, he emailed a prototype to a few friends, and gif-like, it looped — friends emailing friends emailing friends. Four hours later, funding offers were coming in.So Chung and Cooke — who are cofounders, though Cooke would eventually leave to pursue a different startup — thought bigger. Giphy could be far more than simply a search engine. But to do that, it would need to act very deliberately, growing in just the right way and in just the right order.Julie Logan, Director of Brand StrategyFirst up: Giphy needed to reach its ready-made audience. Tons of people were already googling for gifs, but they needed to be trained to head to giphy.com instead. So the startup spent the year mostly on search-engine optimization, making sure it was the top result for all gif-related searches. It also reached out to artists who created gifs and invited them to post their stuff on the site. When brands started asking Giphy for help creating gif-driven ad campaigns — Subway was the first — the company connected them with artists on the site and took no cut of the deal. Giphy didn’t need the cash; what it needed was goodwill and community. It still does this today with its Giphy Studios arm, recently with Converse, McDonald’s and Selena Gomez.(Google seemed to take notice: A few months after Giphy launched, the search giant introduced its own gif search function.)But of course, the gifs that go nuts online aren’t usually made by quirky artists; they’re larger cultural moments. So by Giphy’s second year, it had begun trying to sign licensing deals with major content producers — studios, TV networks and so on. “They’re like, ‘What? Gif rights? We don’t even understand,’” Chung says. Giphy needed to prove that this was worth a studio’s time, so it built a way for other popular services to use Giphy’s trove of gifs. You can see that work in action today on Facebook Messenger, Gmail, Tinder, Twitter, and 600-plus other services, all of which offer some way for its users to use Giphy’s database. “So we’re doing billions and billions of requests a month. Once studios saw the numbers, and that one of their gifs could do 100 or 200 million views, they were like, ‘Oh, this is a thing.’”Other times, Giphy would serve more as a problem solver. The L.A. Galaxy, a pro soccer team, had been tweeting out gifs for a while by the time Giphy called up, but still had plenty of needs. “We’d never thought strategically about these things,” says Chris Thomas, the team’s director of digital media and marketing, “but we were getting really good engagement and spending a lot of time on it.” Giphy created a page on giphy.com for the Galaxy’s gifs (as it does for every partner) and provided gif-making tools, creative strategies and a big social promotion. The Galaxy is now a total convert: It even recently hired someone away from another team, specifically because the woman is so good at making gifs.Giphy makes its partnerships official with no-cash arrangements, which it now has with tons of major players in TV, movies and sports. The deal goes like this: We’ll make gifs out of your content and help distribute them across the internet, and both of us benefit. That’s how, say, Giphy was invited to work with the Golden Globes — and to show the world DiCaprio’s side-eye. Thomas says he might be skeptical of a deal like that from another company, but Giphy won him over with its enthusiasm and expertise. “One of their main goals seems to be to do cool stuff, and that’s what I want to do,” he says. “So there’s an immediate level of trust.”Ralph Bishop, Director of DesignJulie Logan used to text gifs to her friends, which they loved. But they’d never text gifs back. “I got mad and was finally like, ‘Why aren’t you doing this?’” she says. “And they’d say, ‘You’re the gif queen! We can’t compete!’” Lame excuse, but not without merit: This was 2014, and you couldn’t insert a gif into a text without going through a series of burdensome steps. So she built an app called Nutmeg, which offered a curated set of easily textable gifs. Then Giphy bought Nutmeg in March 2015 and made Logan its director of brand strategy. “It was an easy transition because Giphy was the same as Nutmeg — just a much bigger, more comprehensive go at it,” she says.Both companies operated on the same basic observation: There were lots of ways people wanted to use gifs but just couldn’t. As the jargon masters would say, gifs contained pain points. Finding gifs was hard. Sharing them was harder. And making them yourself? Damn near impossible. So once Giphy had built its traffic and its community, it moved on to the next phase of its grand brand-building adventure: It began releasing tools to ease all the pain.These things have been rolling out for the past year or so. There’s a web tool that easily turns video — from your cellphone, YouTube and more — into gifs. Giphy’s first app, released last March, is a mobile search engine that makes sharing easy. Its second app, Giphy Cam, is like a video camera that records only in gif, and layers on dozens of goofy animations (like, say, snapping lobster claws or a cascade of dollar bills). All these services are free; Giphy says it’s currently focused on user growth. Revenue will come later, presumably through ads. “We follow basically everything Google did in the ’90s,” Chung says, “and we just do it with gifs, which have higher CPMs” — digitalspeak for the price of a thousand views of an ad—“so we’ll do the same thing. If they’re making billions of dollars, I’m sure we can make 1 percent of that.”But here’s Giphy’s secret: All this technology was made with a dual purpose. Often the company had to create technology to use internally, like a way to turn videos into gifs. Once the product was refined, Giphy released a consumer version. “A lot of us have backgrounds at other tech companies, where maybe before building something, we’re going to justify it first,” says Nam Nguyen, director of platform products. “But here, it comes from our genuine interest in having these things available to us. The first step of our thinking is, I just want that. Here’s the reason why: I just want it.” And if Giphy’s employees want something, there’s a good chance its users do, too.The company has many ways to riff on this mentality. Consider what happens with one of Giphy’s partners, the popular messaging tool Slack. If you type “/giphy” and some words into Slack — “congratulations,” for example — a related gif will pop up in your chatroom. But Giphy’s employees use Slack all day and are always joking about other tricks they should put into the product. If one seems funny enough, a developer might spend a few hours making it. There’s no mission statement. No project manager to run it by. The person just does it. As a result, Slack is stuffed with silly Giphy Easter eggs. With the right keywords, users can create a gif that zooms in on a friend’s face — try it: “/giphy #enhance” and then the url of a photo — or layers on a caption, or displays the temperature in any zip code atop a weather-related image of, say, a dog on a sled. Nam Nguyen, Director of Platform Products“So when we come out with these crazy ideas,” Nguyen says, “we like to think about the components that make this exist, and think, How can that go further?” The weather gag is a good example. To make it work, a developer first had to tap into data from another source (in this case, weather.com), then create a system that matches up the data with an appropriate gif, then pastes the two together and serves it to the user — all within seconds. That’s not just a silly trick; that’s a new platform with all sorts of applications. What if Giphy struck a deal with ESPN, and sports fans on Twitter or Facebook could instantly create gifs showing the score of a game along with a gif highlight that just happened? Now it’s technically possible, all thanks to a lark.But these are all small tools. When Giphy’s executives talk about building things they need, there is one core, until-now secret product that fits the description above all else. “We have this thing called — uh, we can talk about it,” says Chung, the CEO, as if he’s giving himself permission, as Leibsohn shifts a little on the couch next to him. “Yeah. We can talk about it. We have this other thing called Giphy DVR.”Giphy had created a problem for itself. It positioned itself as the central place for gifs, and partnered with the creators of the greatest giffable content, but how can a little startup possibly keep up that level of production? Giphy DVR is its answer: a software system that takes in a limitless amount of video — live broadcasts, entire movies, it doesn’t matter — and instantly spits out, as Chung describes it, “every possible gif.” Its algorithms splice in tons of ways. The system detects when a scene begins, when a person begins a motion, when closed-captioning starts and more. It also splices at various seconds-long intervals. An hour-long television show could be spun out into maybe 10,000 possible gifs — most of them useless, of course, but that’s what an editor is for. A human simply grabs the greatest gif, the Lady Gaga moment of every live event, and shares it with the world. Soon Giphy plans on giving this technology to its partners. If CNN or NBC or whoever wants to produce its own gifs, Giphy DVR will splice their content into 24 hours’ worth of them. “We’re basically going to tap into every live feed there is,” Chung says. “Imagine all the moments just there for you, and you pick the ones you want. We have that tech right now.” And one day, Chung says, once its partners are comfortable with the technology, Giphy might create a version for consumers as well. Because that’s what it always does.David Rosenberg, Director of Business DevelopmentAbout a year ago news came out that Facebook tried to buy Giphy. No terms were made public. Very little was said on it. But Facebook is a big spender — it bought Instagram for $1 billion and Whatsapp for $19 billion — so it’s fair to guess that the offer was at least interesting. Why turn it down?“Yeah, no comment,” says Chung.Pause. And then he can’t resist.“I mean, one comment we’ll say is, once you own the format and we have the scale that we do, it’s obvious that someone’s going to want to be a part of this, right?”Leibsohn comments next: “I’d also say if you follow our logic, and our trajectory, we are the main player in this space, and it’s going to be essential to what happens in culture moving forward. So, we’re going to be a pretty big force to reckon with.”There’s no way to guarantee their trajectory, of course, but their logic is easier to forecast. That earlier question about Giphy — how do you become the brand that owns something as random as the gif? That’s no longer their big question. Giphy envisions itself as more than just a place for gifs. That’s why it’s obsessed with the moment that gifs capture — because the moment is bigger than the gif. The moment is emotion. “You never search ‘happy’ on Google,” Chung says. But you can on Giphy. So what is Giphy, to him? It’s the beginning of a different kind of search engine, one based on experience instead of information. “You don’t get too many opportunities to compete with Google,” he says. “We competed and we beat them at the gif search. And you’ve seen the office — it’s pretty small. There’s not too many of us. So imagine if we had thousands of people.”Leibsohn is convinced that the world is ready to think this way—that rather than gifs capturing the world, the world caters itself to the gif. Look at Drake, creating a music video intended to be spliced. Look at Hillary Clinton during the Benghazi hearings, dismissively brushing her shoulder in an instantly giffable way. “Come on, that’s not just happenstance,” Leibsohn says. “She’s being coached to be visual on purpose. You’re going to see everyone start to think about how they can be translated and remixed and repurposed again and again.”Is that true? I put it to Stacy London, host of TLC’s Love, Lust, or Run, whose contemptuous eye rolls and shocked jaw drops are regularly giffed. Does she operate her face with the internet in mind? Well, not exactly. “I’ve always kind of done them,” she says. She knows the looks are popular with TV viewers, so everything else is gravy. Still, she does love her gifs. “One of my best friends likes to respond to my texts only with my eye-roll and side-eye gifs,” she says, “which I think is hysterical.”It’s all the same to Giphy, really: Regardless of why she does it, she makes moments. That’s what counts. Join our live video chat with the Giphy team on March 22 at 9 a.m. PT/12 p.m. ET. Submit your questions on the event page or tweet them with #GiphyChat.