The Sad Business of Comedy on the Web

In a recent episode of "South Park," the show's young cartoon protagonists need to raise some money quickly. Their three-part business plan: Film their nerdiest friend—the terminally earnest Leopold (Butters) Stotch—singing and dancing lasciviously. Post the footage on the Internet. Make bank. Everything goes as planned—their video gets millions of hits. But when the gang heads down to the Department of Internet Money to collect their presumptive bounty (joining a long queue of the Web's biggest video stars, including Cute Sneezing Panda, Laughing Baby and Dramatic-Looking Gopher), they learn they have struck fool's gold. Their check for $10 million is in "theoretical" dollars.

It's funny (trust me) because it's true. Or not so funny, if you happen to be an investor in a comedy Web site. With legions of teenage boys lurking online and no shortage of celebrity hype, the Internet as a medium seems made for comedy. What's not to like about a furry animal confronting seemingly difficult emotions, or a portly senior citizen dancing as if no one is watching, or anyone behaving like a ninja who is not actually a ninja? But as a revenue driver, comedy on the Web has thus far been a joke. Despite the proliferation of high-speed Internet connections and affordable video equipment, a rash of high-profile humor Web sites, many launched by established media companies, have failed in the past two years. Last July the HBO and AOL joint-venture comedy site was shut down. Time Inc.'s was dumped overboard in 2006. Turner Entertainment is folding its ailing into its Adult Swim cable-channel site.

To be sure, not all entertainment content is a bust. Downloadable movies and music are bringing in steady cash. What's so difficult about monetizing funny? Ask Robin Williams: trying to be hilarious 24/7 is impossible. No King of Comedy seems immune. Will Ferrell, the funniest man in showbiz today, is a partner in The site launched a year ago with his debut video, "The Landlord" (featuring Ferrell getting upbraided by his landlord, who—here's the joke— is played by a toddler). The video got tremendous buzz and has been viewed almost 57 million times. Since then, Ferrell has produced several more videos, all of them hysterical. But none have come close to generating that kind of traffic. His site, which had 4.5 million unique visitors in April 2007, saw the number drop 81 percent to 835,000 unique visitors in April 2008, according to comScore, which measures Internet traffic.

The lesson? Even for highly regarded sites like FunnyOrDie, the early stages of development are as much about managing expectations as they are about getting yuks. "Would I like to have a 'Landlord' every day? Yeah, but it doesn't happen," says Mark Kvamme, a founder of the site and a partner at Sequoia Capital, which is funding the bulk of the venture and deposited $15 million into the site's bank account last December. To hedge against the slow days, the company is expanding its concept into the OrDie network. Skateboarder extraordinaire Tony Hawk hopes you'll spend lots of time at, where he is a partner. Are you a foodie? EatDrinkOrDie wants your attention. Several other sites are planned, all of which will use the company's Silicon Valley-based technology staff and sales force. "We are trying to build the Viacom of the Net," Kvamme says, referring to the parent company of MTV and Comedy Central, which people once watched on a boxy screen they called a television in the living room.

The comedy-Web-site trail of tears is littered with corpses that were content-rich, but technology-poor. Some media companies knew how to produce funny skits, but not on shoestring budgets constrained by anorexic Internet ad revenue. Others simply replicated the TV-viewing experience by posting videos but failing to engage users with any sort of interactivity, as opposed to sites emerging now that allow them to rate videos they like and pan, or even banish, ones they don't. "Great content is necessary, but not sufficient. You have to have both," says Dick Glover, chief executive of FunnyOrDie, which after launching Ferrell's videos started encouraging visitors to upload their own, à la YouTube.

But funny is in the eye of the beholder when it comes to user-created videos. "We see an opportunity to be broader than what's out there, and not just [footage of] guys getting hit in the groin with whiffle balls," says Dean Valentine, a founder of, a venture-capital-funded site that launched three months ago with a combination of professionally created content (its "Make a Hot Girl Laugh" has been a big hit), jokes and user videos. The site is primarily an aggregator of what it deems "the funniest stuff on the Web" each day. "We sift through a sea of content and post the best of sites like YouTube and FunnyOrDie," says Valentine, a former CEO of UPN and president of Disney Television. With a URL like—so straightforward and devoid of irony—you have to wonder about the site's sense of humor. But Valentine says he chose the name for business reasons: he thinks it will appeal to the broadest audience possible. After all, there are 10 million theoretical laughs in the big city.