SAY Media was born last fall when popular advertising network VideoEgg acquired struggling blogging platform Six Apart, in a union that didn’t immediately make a whole lot of sense. But, as VideoEgg founder and SAY Media CEO Matt Sanchez explains, the site is now looking to leverage Six Apart’s technology to create a “modern vertical media company” focusing on niche communities of passionate users. And Dogster will be the first community of many to join the SAY Media network.

Dogster (and its sister site, Catster) got its start as a social network for dog owners. But after the rise of Facebook the site evolved into an editorial-based community for pet lovers. The company currently has a team of around five full-time staff focused on creating content (in addition to numerous contributors), who will be joining SAY Media’s team of 350 people.

Sanchez says we can expect SAY Media to acquire numerous other sites as it builds out out its roster of “interesting, passionate verticals”, which will include topics like food, home, lifestyle, and wellness. Some sites will also be created in-house.

Sanchez says that Dogster will continue to live on under its existing brand, though SAY Media will incorporate some of its best practices as far as encouraging user engagement and improving the site layout.

Disclosure: TechCrunch founder and editor Michael Arrington holds a small stake in Dogster.

When it comes to social sites on the Internet, Dogster and Catster have to be doing something right — they’ve been profitable for the past three years. But that doesn’t mean they should just sit back and not tweak the sites at all to offer a better user experience, and they know it. That’s why both sites have undergone a complete refresh. In what CEO Ted Rheingold is calling basically a “full reboot,” the logo, layout, taglines, and even the services have all been revamped.

For those unaware of the obvious, Dogster is a social network for dog owners, while Catster is a social network for cat owners. But Rheingold started realizing that people weren’t just coming for the social aspects of the sites, they were coming for information and services. So this revamp puts an emphasis in those areas. It’s a mixture of community created content and professional content.

“Community services are great for adding tons of content, but not for organizing it,” Rheingold says. And with so many people coming to the site from search engines, they often get confused when they get there. So the two sites are now much more curated. Those running the sites look for the best information provided from the community and mix it with the best professional information they have to put up. Rheingold feels this mixture is the best way to do it because, “people don’t like trusting what they read on the internet from other people — often, they like experts. But experts usually have an angle though so people don’t always trust them either.” In fact, he thinks this mixture will be the future of all community content sites.

On top of the refresh, Dogster and Catster have a few new partnerships they’ve entered into. The first is a long-term strategic partnership with Petfinder.com. You can now search for and bookmark adoptable dogs and cats via the adoption areas on Dogster and Catster. And those that decide to adopt will be pointed to Dogster and Catster as a way to keep getting information about their new pets.

Another relationship involves Yext, which allows Dogster and Catster members to find the best vets in their area. Rheingold notes that Yext does such a good job with services like this that it just made much more sense to partner with them rather than try to do their own thing.

Finally, Dogster and Catster are some of the first partners to use Hunch’s new decision-making widgets. “The goal here is to present the lowest barrier to engagement for a persone with questions while still offering someone customized help,” Rheingold says, noting that even users without profiles can get access to great information this way.

Another new thing Dogster and Catster are trying is engagement emails. Rheingold realizes that a lot of people visit sites but then don’t go back for whatever reason, so this is a way to keep them involved with information they may care about. For example, if Dogster/Catster knows you got a puppy or kitten six months ago, they might now send you an email to give you some information that you should know for animals that age. Rheingold notes that they have a million registered users but advertisers don’t care so much about that — they just care about engagement. And this is a way to keep people engaged.

Rheingold also notes that Dogster and Catster are seeing about 4 percent of all of their traffic coming from the iPhone now. That’s much more than he ever expected, and that was another reason why they wanted to redesign the site. Everything is much better suited for a smaller screen now, he notes. Mule Design were the ones who worked on the redesign.

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.

http://cosmos.bcst.yahoo.com/up/fop/embedflv/swf/fop_wrapper.swf?id=10780945&autoStart=0&prepanelEnable=1&infopanelEnable=1&carouselEnable=0

UnitedDogs.com and UnitedCats.com offers traditional social networking tools such as blogs, profile pages and photo sharing to pet lovers, and is available in English, Russian, German, French, Spanish, Portuguese, Croatian, Dutch, Danish, Estonian, Latvian and Lithuanian. Combined the sites have over 40,000 members, not enough for it to be counted by comScore, although the new Alexa notes that UnitedDogs is a top 1000 site in Luthiana and also scores well in Malaysia and Indonesia.

UnitedDogs.com compares well to competitor PawSpot (our review) in terms of traffic but still lags (or should that be wags…) well behind market leader Dogster.

This is the second investment in United Dogs and Cats by Ambient Sound Investments, having provided an undisclosed Angel Round in October 2007. See also ASI’s May 2007 investment in Freenzo. The additional investment takes ASI’s stake in the company to 18%.

The new money will be used to expand the reach of the UnitedDogs.com and UnitedCats.com.

disclosure: Michael Arrington is an investor in Dogster

Clavier, who has a degree in computer science, has been actively investing in startups over the last few years and has had notable successes such as Truveo (acquired by AOL for a rumored $50 million), Userplane (acquired by AOL for a rumored $35 million), MyBlogLog (acquired by Yahoo for $10 million), Kaboodle (acquired by Hearst for a rumored $30-40 million), Mayas Mom (acquired by BabyCenter for $7 million), Dogster, Kongregate, Edgeio and many others. In other words, he has an eye for winners. His investment philosophy will remain much the same, he says. He’s just now investing money from limited partners as well as his own capital.

He says he’ll invest the fund in a total of 30 to 40 seed stage startups with investments ranging from $100k – $500k. SoftTech VC will focus on consumer Internet.

Clavier has made four initial investments through the fund: Satisfaction Unlimited, Social Media Network, Grouply (which will launch at the conference today) and Active Athlete.

I was one of the investors in the round (and I’ve updated my disclosure statement to reflect that). A few people have asked me why I invested in this company. After all the principal founder, Ted Rheingold, doesn’t even own a pet. And if anything there are simply too many social networks out there today. Most of them will not survive.

I think I made a good investment decision though. Dogster was started on table scraps from a few friends and family of founders Ted Rheingold, John Vars and Steven Reading. These guys kept operations extremely lean from the start, and brought the company to profitability about a year ago, just shy of their two year birthday.

Growth in terms of users, page views and revenue continues to increase aggresively. And while Dogster is still small, the company continues to run on a very tight budget. No money is wasted. They even asked me for a free $200 job listing on Crunchboard. I declined, and they bought it anyway.

Big name advertisers have flocked to the site, including Disney, Target, PetSmart, Clorox/FreshStep, Gap/Old Navy, Warner Brothers, Nintendo and VPI Pet Insurance. The fact that they stay on after an initial test shows that they are getting value for their advertising dollars.

But what I like even more than the business model and growth metrics is the team. The founders are all solid, street-smart entrepreneurs. They recently brought on Jeff Clavier and Scott Rafer as advisers, two people I have a great deal of respect for. And as part of the round Michael Parekh agreed to join the board of directors of the company as well. He’s one of the smartest people I’ve ever met, and that pretty much sealed the deal for me.

As with all companies where we have a conflict of interest, we’ll disclose that when and if we write about Dogster in the future, and we’ll most likely have another writer cover them as well. In the meantime, please visit my dog Laguna’s Dogster page, and consider throwing her a bone or two.

The PawSpot site is still in beta and there aren’t many users yet (Dogster has 260,000 pets and gains about 700 new pets per day). However, it’s also taking a much different approach to serving pet owners than Dogster/Catster.

First, on PawSpot a human profile is included along with a pet profile, and users are encouraged to become “friends”. Dogster does not allow any personal information about a person to be included on their site – its for pets only. However, Dogster also encourages pets to become friends, linking them on the site.

Second, while Dogster focuses on being a showcase for featured pets, a place to show them off, PawSpot seems to be aiming to provide much needed services to pet owners. In particular, arranging for friends to take care of each other’s pets while away on vacation, and finding local dog parks.

For now I’m staying with Dogster. It’s too much trouble to move the page I have up for my dog Laguna over to a new site. Also, Dogster is a refreshing break from other social networks, which always seem to degenerate (by plan or otherwise) into dating sites (well, except for LinkedIn, I guess). The lack of any personal information ensures that.

Dogster is a home page site just for dogs. You can see the page for my dog, Laguna, here as an example. A key part of the site is social interaction among dogs, and Laguna has a number of “friends” that are linked on the page. Dogster also allows tagging of photos, and has just launched a Groups feature (there are already 239 Groups) In general, humans do not interact and you do not know who the dogs’ owners are. For a lot of dog-crazy owners, this is perfect.

Needless to say, Dogster has some pretty loyal users, and the site statistics reflect this:

• Total human members: 153,000+
• Total pet pages: 185,000 (130k dogs, 55k cats)
• Average new pet pages per day: 525
• Page serves December 2005: 10,100,000
• Total photos on the site: 750,000
• Distinct friend-to-friend connections: 5,030,000
• Virtual treats givens: 7,079,000
• Total forum postings: 232,000 (1,500 new posts a day)
• Total pet diaries: 28,000+

Dogster even has a search engine for dog friendly hotels.

The story of Dogster is great, too. Ted was out of work and taking odd jobs here and there, and decided to just follow a dream and create the site. Within 3 months the site was cash flow positive and by month 18 Dogster was profitable. The company never raised outside funds other than from friends and family

Dogster generates revenue from premium accounts ($20 per year), advertising, and sponsorships both on the side and for things like “The World’s Coolest Dog and Cat Show“, which was sponsored by Target, Nintendo and others. The show, by the way, had 20,000 entrants and over 1,000,000 total votes.

Catster (launched in June 2004) is Dogster’s sister site, but I hate cats and refuse to write about it.