Dogster has never been a Web 2.0 darling. At first glance a social network for pets isn’t the most innovative idea, and its audience is limited to the kinds of wackos who make name tags for their dogs at conferences or create elaborate fictional personalities for their cats.
But with the benefit of hindsight, Dogster has done two things very, very right: It never raised venture funding and never relied on an ad network for revenues. The result is its network of sites– Dogster, Catster and Snuzzy– that focused on maximizing revenues early on instead of aiming for user growth for the sake of user growth. While many other Web 2.0 names are struggling to raise more money to stay in business, Dogster has been profitable since the second quarter of 2007 and is solidly in control of its own destiny. (Full disclosure: Michael Arrington was a very early angel investor. His statement about his investments is here.)
Not only that—premium ad sales for the sites are up 20% this year. Why? Because while hot sites like Digg and Facebook outsourced ads to big players like Microsoft and smaller sites outsourced them to Google, Dogster has invested five years in building direct relationships with big pet food, supply and other consumer packaged good brands. “We figured each $50,000 ad deal was like getting another angel investor,” says Ted Rheingold, Dogster CEO.
These aren’t lame banners. These are coupons, contests and other things that incent users to interact with the brand. A recent example was a coupon from Royal Canin Cat Food. The company was hoping for 500 takers and it got 5,000. As a result Dogster and Catster charge $10-$12 CPMs and as high as $40 CPMs for their newsletter. (I interviewed Rheingold about this strategy back when I was co-hosting TechTicker. The clip is below.)
But there’s a problem. Dogster is still a small site and even happy advertisers will only continue to pay so much to reach the same users. So Dogster has solved that by deciding to become in essence the thing that it always argued startups shouldn’t work with: Ad resellers.
Dogster will now sell ads for the much larger Cheezburger Network of Lolanimal-related sites that include IHasaHotdog and ICanHazCheezburger—a never-ending meme that will hit one billion page views later this week. “That’s 10 billion cat pictures served,” says founder Ben Huh. “At 72 pixels per inch, if you laid them out end-to-end it would reach the moon and back four times.” (I’m guessing that moon part is actually true. Huh also told me that under the new deal every time they sold an ad, Dogster would ship them a free dog.)
The two have just closed their first sale to Clorox for Fresh Step Kitty Litter. Sexy? Maybe not. But it’s lucrative. But Dogster is no longer in the one million-unique category, it’s selling for six million uniques and until the CPM dies, this is still a volume industry. Neither company would comment much on the economics, but Dogster is taking a smaller cut than a traditional ad network would. In exchange, Cheezburger Networks has to do more work to make sure the ads are effective, whether it’s creating a contest or just tracking the metrics the way Dogster already does in house.
It’s an interesting announcement, since ICanHazCheezburger is so much larger and better known. Typically it’s the smaller site that outsources inventory to the giant. But the founders Huh and Rheingold were long time friends who’d frequently ask each other’s advice: Rheingold would ask how Huh got those gaudy user numbers and Huh would ask how on earth Rheingold was so good at monetization. Looks like the two will now be able to actually share those areas of expertise: Dogster now gets a network of six million uniques and Huh gets much higher revenues.
Neither of the deals is exclusive. Dogster plans to add more complementary sites to its ad inventory and Cheezburger Networks plans to ink similar partnerships for properties with non-pet user profiles like the FailBlog and newly launched ItMadeMyDay.com—which has already hit one million page views.
This is what clever advertising is about. I’m sick to death of seeing sites plastered with google ads when they have so many more opportunities to profit. It’s really horrible.
HAMSTERster is still the top notch pet site.
Digg is a hot site? I think you forgot that this is not 2007 anymore. DIGG = DEAD.
Not exactly. Digg may have lost some of its power but it’s still one of the best social bookmarking sites around.
You idiots ever care to look at their traffic numbers? Visitor count is up and up = hot site
Sarah, great article. You are 100% right – Dogster has done lots right. They serve a large, passionate audience, which is predisposed to spend through their affinity. This is a smart, real business run by great entrepreneurs. Hats off to Ted & Steven.
It will be interesting to see what type of CPM’s they will be able to get, I don’t think the engagement level is the same for the new sites they’re adding. Dogster gets $10+CPM’s because they actually get a solid ROI for advertisers, I doubt that ICanHazCheezburger is going to sell near enough pet products to rationalize that type of ad rate. e.g. I’ve been to ICanHazCheezburger 10 times this month and I have no cat, and I’m not alone. Compare that to Dogster, Catster, etc. The users that visit Dogster are ultra-intense dog owners looking to spoil their pets. It’s a very different user and a very different engagement level.
While its nice to hear that a start-up has avoided screwing the pooch what’s the value in this story? A site that sells ads direct begins rep’ing ads for other sites in its category – wow! It sort of sounds like one of those things called an ad network or a vertical ad network (addify, federated?) or a rep co-op (Gorilla nation) . And they are coupons and contest promos – I have never heard of this before. That dog don’t hunt.
Maybe the point is throwing a bone to the Arrington portfolio company?
Hi J.
Yes, ad networks are a race to the bottom. This will be nothing like that and that’s why it will succeed for all involved, not just the network provider.
anyone know how much share they sold for teh 1 million usd they raised ?
I do
Dogster is so lame. My friend’s startup is way cooler. I’m a hater. My mom’s basement is cold at night.
Oh, wait… you mean we’re allowed to say something nice?
Ted will be the best-looking guy on my panel at TribeCon in New Orleans at the end of October.
But Snuzzy gives me a sugar crash every time I see it
I agree with Allison that the conversion rate will definitely be lower for ICanHazCheezburger because it is more of an entertainment site than a portal for devoted pet lovers.
That said though this is a great idea and one many publishers including serious bloggers would do well to emulate.
In a post I’ve frequently wished I had named something else I clearly explained what makes advertising work for those buying it and NOT annoy consumers.
I’ll link it to this post in hopes more will read it and understand the finer points that what works best is what benefits all parties and when it comes to advertising that means RELEVANCE!
“until the CPM dies”
Only in lala land.
Nice picture. Who’s the handsome pooch?
Mike Arrington’s portfolio:
DanceJam.com
Seesmic.com
Dogster.com
very nice picture
x million page views – is this per day?
The excessive stroking of the dog in the beginning of the video is seriously creepy.
wait…
“It never raised venture funding …”
and…
“Full disclosure: Michael Arrington was a very early angel investor.”
So, are you saying it never raised funds from a ‘Venture Capitalist’? They still raised capital, albeit from a shoddy angel investor…might want to make that a bit clearer.
Well… they really are different. I know of at least one other investor in Dogster who’s day gig is as a venture capitalist. But his fund doesn’t invest in consumer plays like this, so he invested as an angel.
Great article and good insight.
I love that while the press buzzes about Twitter’s VC 80 times a day Dogster has been quietly building an empire as one of the most profitable social networks around…
But TC Media can’t talk about Dogster that much because of the conflicts of interest.
Great article Sarah. Always nice to hear about the not-so-exciting companies that have managed to build a profitable, solid business. Also, my cat is the cutest.
Big woof to Ted and the Dogster team for their continued success! Nice deal. You guys rock.
who on earth would put a nametag on their dog at a conference? uh, oh wait…mike? uh, sorry.
Sarah,
Why are you characterizing the users as “wackos?”
It bothers me because a. the users aren’t wackos, they are just passionate about something they care about, b. it’s nasty and c. you are adding to the nasty discourse online. Something which I recall you’ve complained about when it was directed at you.
I think you owe the Dogster/Catster users an apology.
mary
PS. Ted and gang at Dogster/Catster: congrats on the article albeit with the wacko user remark. You guys do great work.
Shouldn’t the video be called “Preparing for Ruff Times”?
ha. ha. ha.
Dogster is a great company, and whether or not you call its funding “venture” or “angel”, i think they’ll do well in the long run, for its founders & employees, for its customers, and for its investors.
Ted is one of my most admired & respected entrepreneurs, and they’ve built a great brand and company that continues to grow, and is extremely relevant to its users & customers.
congrats Ted
I wish I could be happy for these guys but I’m not. The arrogance of the ‘founders’ is frightening.
It’s spelled ICanHasCheezburger, not ICanHazCheezburger.
The dog in the photo could be my dog’s twin. Where did you find it?