Mo' money to build a bigger Dogster niche
A year ago (give or take 10 days) I wrote about Dogster Inc. - the maker of the highly popular dogster.com and catster.com - turning profitable, an unusual fate among Web 2.0 companies. It was still a very small business, but gave co-founders Ted Rheingold …
Context & Ripple Effects
Dogster entered this financing from an unusual position for a small Web 2.0 business: it was already profitable. Earlier coverage had also placed Dogster among the properties potentially relevant to Fox Interactive’s search for social-network assets, framing the company as more than a pet-focused community.
The additional $1 million gives Dogster Inc. capital to expand its niche-network model without making profitability itself the sole constraint on growth.
First-order effects
- Dogster Inc. can fund expansion of Dogster.com and Catster.com while its co-founders retain a business that has already demonstrated profitability.
- Potential strategic buyers such as Fox Interactive face a better-capitalized Dogster, raising the value of its niche audience and operating business.
Second-order effects
- Other Web 2.0 companies seeking funding must contend with Dogster’s contrasting pitch: a focused community can pair audience growth with an established business model.
- Investors gain a concrete example of a smaller vertical social network using outside capital for expansion rather than to cover an unproven operation.
Third-order effects
- If profitable niche communities continue to attract growth funding, social-network competition may divide less by broad audience scale and more by the economic value of tightly defined member groups.
The trend: Web 2.0 financing is beginning to reward vertical communities that combine a distinct audience with evidence of a sustainable business.