Dogster and ICanHazCheezburger Join Ad Forces

10_1251740814Dogster 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—which has already hit one million page views.