$600m mirage: Is this gif empire built on sand?

GIFs are “cool”.

Millennials love them. Buzzfeed is packed with them.

In 2016, these lovable low-resolution animated images are de rigueur, but on what planet are they worth millions of dollars?

This week the tech world reached a new level of madness when Giphy, the world’s most popular GIF search engine (yes, really), raised $72m from a group of visionary investors.

This latest round of cash values Giphy at an eye-watering $600m. Yes, don’t adjust your screen, $600m for a GIF search engine.

Insane growth

In the past 9 months alone, Giphy doubled its valuation (it was only worth $300m in February), despite, as the Wall Street Journal points out, not figuring out how to make money.

Giphy recently started working with “brand partners” including Disney and Calvin Klein, placing their logos across sections on the site.

Credit where it’s due, Giphy has seen exactly the kind of growth Silicon Valley investors dream of. GIFs hosted by the service are seen by 100m viewers every day, that’s more than most major news websites around the world.

But with most people outside of the tech bubble finding GIFs on messaging apps and on other sites, it’s not yet clear how users will realise advertisers are working with the service.

Whose content is it anyway?

But here’s where eyebrows start to be raised.

Most GIFs aren’t original content. The vast majority are cut and sliced from films, TV shows and even Spongebob Squarepants. In other words – this is content with copyright repurposed for the web.

It’s no secret that Giphy doesn’t own much of the content it “shares”. In fact, numerous examples on the site are copied from other GIF sites and discussion boards, which also ripped off original content.

So where is the value? And what will stop someone else doing exactly the same thing?

We’ve seen this before. Both YouTube and Tumblr built their empires on sand by ripping off vast swathes of content and worrying about the consequences later. YouTube has since cleaned up its act and Giphy appears to be doing the same.

Hopefully I’ll be proved wrong.

Perhaps Giphy will ‘pivot’ (an awful term used by Silicon Valley types that describes a total change of strategy) and blossom into something we can relate to as a functioning business.

For now, as long the service keeps on growing, it’s business as usual. As explained to TechCrunch, the leading source of news in Silicon Valley, Giphy won’t “flip the monetization switch as long as the service keeps growing and investors are willing to invest”.

2016 – the year when Vine died and GIFs became big business.