Cheezburger Network’s Ben Huh on Startup Strategy, Expansion, and Making It Big

It took about a year and a half before I could even begin to understand the I Can Has Cheezburger (or “LOLcats”) phenomenon online. The mundane yet bizarre cat pictures. The misspelled captions. The curious Internet-slang grammar. They were kind of funny, but mostly they were weird—and, at times, even a little annoying.

Yet millions of people flocked to these Web pages, submitting their own photos and captions and commenting on others. The Cheezburger Network, as the company behind it is now called (formerly Pet Holdings), has become a runaway success—an Internet sensation that has spawned a total of 26 humor sites, including FAIL Blog, GraphJam, Engrish Funny, and Emails From Crazy People. The original Cheezburger site hit 1 billion page views (10 billion cat images) earlier this month. And during the first half of 2009, the company raked in seven figures’ worth of revenue from advertising, licensing fees, and sales of merchandise, according to Time magazine.

So what’s its big secret? Why has the Cheezburger Network succeeded where so many other humor sites and blogs continue to toil in obscurity? It took me a while to realize it’s not about luck, or marketing, or the power of certain kinds of humor. There’s some good timing involved, sure, but mostly it’s about the drive and mentality of the company’s leader, Ben Huh.

Huh is often portrayed in the media as a jokester. Photos in articles show him wearing a funny hat or mask, surrounded by stuffed animals, or posing with a cheeseburger. That image is pretty far from the reality, as I understand from reading more about Huh and interviewing him recently. In a Q&A with Advertising Age earlier this week, for instance, Huh emphasized, “I am a business person.” And he shed some very interesting light on his approach to business: “We’ve gotten into situations where we’ve tried to acquire a blog for large sums of money, and they turned us down, and we’ve gone on to compete and we’ve won,” he said. “My final offer is, ‘If you do not do this, we will start a competitive blog, and we will not stop until we win.'”

Clearly, Huh has the killer instinct. He is deeply competitive, but not in an over-the-top way. He could turn out to be the Michael Jordan of consumer Internet startups, though we probably shouldn’t put him in the Hall of Fame just yet. Still, as a promising entrepreneur in his early 30s with a pretty big success already under his belt, his story—and his company’s strategy—is worth a closer look.

Huh first arrived in the Northwest in 2005 to work for Intava, an interactive media startup in Bellevue, WA. Before that, he had graduated from Northwestern University with a degree in journalism during the dot-com bubble. “They were handing out bonuses to college grads because we’d used the Internet once,” he jokes. Huh worked for a number of startups in the Chicago area, including his own Web analytics firm. “I made all the mistakes they say you’ll make,” he says. “I raised too little money, and spent all my time fundraising and not making a product for the market.”

By the time he landed in Seattle, Huh had made it a priority to always work for a company’s CEO, or at least have a dotted-line connection to them, in any job he took. “That was going to teach me more about running a company,” he says. “This is for my career, not for [any particular] job.” Huh had also learned from his previous startups to have a “huge focus on staying profitable.”

In 2007, he came across the I Can Has Cheezburger site, which had been started by a couple of entrepreneurs from Hawaii earlier that year. Intrigued by the site’s traffic numbers (about half a million pages views a day), he showed it to his friend Andy Liu, the co-founder and CEO of Seattle-based BuddyTV. “Andy said, ‘Why don’t you buy it?’ I said, I don’t have the money. He said, ‘If you can buy it and run it, I’ll help you raise the money,'” Huh recalls. So he put up $10,000, and Liu helped him raise a large (and undisclosed) round of angel funding.

Huh took over the site and started Pet Holdings in the fall of 2007. In those early days, he says, he “focused on not changing anything.” “We didn’t really know what the hell we were doing, so we tried to leave the community as alone as possible, and keep what the former owners were doing very stable,” he says. But he did make some small changes—moving to a regular schedule of daily content to maximize traffic, launching some new blogs, and making the content-sharing interface easier to use. “Originally we thought, it’s not about cats, it’s about humor. It was a longer road, but we thought we could get there,” Huh says.

In April 2008, Pet Holdings bought FAIL Blog, and was up to five sites. Traffic kept growing, and ad revenues were pouring in; the company was profitable from its first month. There wasn’t any inflection point. “It was very gradual,” Huh says. He attributes the growth to the sites’ “consistency of content—something of specific quality we do every day, over and over again.” (One point of strategy that strikes me is that Huh has also known exactly when to buy already-popular sites, and how to turn them into even bigger hits. As opposed to building online communities and readership from scratch, which is what lots of entrepreneurs try to do.)

The past year has been all about financing the company’s growth during the recession and staying profitable, Huh says. In the first quarter of 2009, Cheezburger Network saw a 52 percent decrease in ad revenues, but with the second and third quarters came a “stronger than expected” recovery, he says. “We said, ‘OK, we’ve got a little bit of money in the bank, we feel comfortable, let’s continue to grow.'”

So, Huh has been aggressively forming partnerships with ad networks, including San Francisco-based Dogster last month. In addition to expanding Cheezburger’s online store, he has also released three humor books, the two most recent (Fail Nation and Graph Out Loud) having come out earlier this month. Huh has been on the road a lot doing promotions. On the marketing front, he advises that “it’s a lot better to have a small group of really passionate fans” than a large number of people who are lukewarm about your product. “You need a team of people who’ll root for you and fight for you,” he says.

So far, it’s all paying off. The Cheezburger Network is up to 21 employees in its offices in the Lower Queen Anne neighborhood of Seattle, and Huh says he’s looking to hire three more people this month as the company is “going through a rapid expansion.” The ultimate goal, he says, is to become “a first-tier publisher.” That means being a household name, Huh says.

Like I do with a lot of CEOs, I asked him a bit more about his company’s culture. “We’re not afraid to laugh at ourselves,” Huh says. “We encourage the taking of risk—without it, we can’t generate good websites and good ideas.” Asked to boil down the company culture to one word (you can read other local startups’ responses here), Huh says it would be “happy.” Cheezburger Network’s mission statement is to make people happy for five minutes a day, he says. That comes from fans writing in during the first year to say what the LOLcats site meant to them.

At the end of the day, of course, there is still some mystery surrounding the success of the Cheezburger Network—namely, why certain sites have taken off so fast. Huh has previously pointed out that he has launched a number of sites that didn’t take off, so he killed them. So a fair bit of trial and error is still involved. “I wish I knew the answer,” Huh says. “What we do works, so we keep doing it. It works for very different reasons for very different people.”

Not everyone around him loves LOLcats, though. Huh, who is famously allergic to cats in real life, says his dog is not a big fan of the site. “He prefers to look at my e-mail,” Huh says.

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