Hamburg, Germany based XING, a global professional social network that’s strong in Europe, has acquired New York based socialmedian for an undisclosed amount approximately $7.5 million in total, a mix of $4 million in cash up front and an earn-out valued at between $700,000 to $3.5 million (€0.5 million-€2.5 million) payable over three years. Socialmedian’s founding CEO Jason Goldberg is relocating to Germany and will be joining XING as Vice President Applications Platform, and the entire socialmedian team will be integrated into the company.
Socialmedian is basically a personalized news filter that integrates well with social networking platforms. It aggregates news articles from around the web, blogosphere and social services like Digg, Delicious, Twitter, Flickr, Facebook, YouTube, Google Reader, FriendFeed, etc. which are then filtered by topic. Users can pre-define which keywords and topics they’d like to receive news on, and they can also submit articles to the site with the help of a bookmarklet. Stories can be viewed either in chronological order or according to popularity on the network. The startup was operating on a mere $560,000 in seed funding from individual investors and The Washington Post Company, so this is definitely a successful exit for them.
About 3 weeks ago, we reported on XING CEO Lars Hinrich, who founded the company in 2003 and led it to an IPO three years later at the Frankfurt Stock Exchange, stepping down. He still got to announce the news, though:
Why do we think that socialmedian is a perfect fit for XING? Here´s why: In business success depends on access to the right information at the right time. Both the speed of information and the sheer volume of data have increased rapidly due to the rise of the internet. Traditional media companies, social media such as blogs, tweets, videos and other user-generated websites now provide daily news, leading to a veritable flood of information. The consequence: Time-strapped professionals are forced to parse through numerous news sources for relevant information and sort, organize, and share stories on their own.
In the short term, this is mostly about adding business news functionality into the network, and hiring experience and knowledge. But with this acquisition, XING also shows that it’s not about to give LinkedIn and Facebook, both of which are expanding rapidly across the globe, an easy path to dominating social networking for professionals. The Applications Platform division that former Jobster CEO Goldberg will be heading is an entirely new business unit and will likely take a page from the application strategy that both LinkedIn and Facebook exhibit. It will basically enable application developers and content providers to connect to the XING platform. Goldberg’s first job will be launching OpenSocial on XING (due this Spring), after which he’ll concentrate on making strategic partnerships with service providers that can bring added value to XING’s member base on a professional level.
Publicly listed XING currently boasts nearly 7 million members (up from 4.8 million in 2007), about 510,000 of which are paying about $90 per year for a premium account to get full networking functionality. XING has been cash-flow positive 3 months after the start and boasted seven record-breaking quarters after the IPO, achieving more revenues and earnings in each quarter. Revenues from January to September this year amounted to $32 million, 28% more than in 2007 as a whole.
We’re left wondering if the acquisition was settled over Twitter. If you don’t know what we’re talking about, read this.
I think this is a first!
A European company buys an American.
Congrats Xing and best of luck!
Wrong. Cegedim (france) bought dendrite some time ago. May not be a web2.0 buy out but still.
Vengu,
Can give evidence is not?
Yes I am wondering what Mr. Arrington would say about this
surprised and happy to hear this news. maby an important step to bring “social things” forward in Europe
Wow..not even a year and with $600,000 angel funding. This is an amazing story. Great job, Jason.
Congrats to the team at Social Median. I really like this service quite a bit.
Wow, congrats!
Interesting acquisition. It seems that they decided to sell out very early. SocialMedian has been having some substantial growth recently and maybe they miss the boat and jumped ship to soon.
Does anyone else feel like $7.5 milion seems rather high? Especially in this economy for a site that isnt really “all that”
a 500g investment into 7.5m is genius any way you look at it.
excellent angling. hook, line, and sinker.
i dont think there was anything wrong with JG’s tweet for funding.
VentureLocator.com – Got Angel?
It’s a great return, but not genius any way you look at it. It’s a great relative return, for sure. But, for example, if the backers had been institutional venture funds, depending on their fund size they would have found that 7.5M just doesn’t make enough absolute difference to their overall fund return. This is one of the biggest sources of misaligned incentives between VCs and entrepreneurs.
Yes, this is actually some great deal for XING. Sounds cool!
Good move by Xing.
7.5 million sounds about right, maybe slightly on the high side but nothing unreasonable.
Congratulations to the Social Median team.
Its good to read such positive news items these days.
This announcement makes me feel sick — Socialmedian is just a content scraper with financial backing and voting features … so that makes it alright?
Awaiting Allen’s take.
http://www.cent...ontent-goldberg
Brandon:
socialmedian does not scrape any content. I’ve commented on Allen’s post regarding our fair use of content.
Like Google News, Digg, Mixx, and other sites, we help publishers get their content in front of new audiences and help end-users discover great content that matches their interests.
Jason,
I admire your consistency, but seriously your site scrapes content. You may refer to it as “enhancing” the content like you have in the past but the fact of the matter is that your site republishes content from other websites.
I know you can’t agree with me because so far you’ve been able to get a large amount of people to believe that what you’re doing is 100% legitimate.
The difference between Digg and Mixx is that they are more of “link-sharing” sites. They do not republish actual content. There is actually no place on either Mixx or Digg to that enables the content of the article to be viewed — except for the description blurb which is usually limited to ~300 chars and is at the descretion of the submitter.
As far as comparing Socialmedian to Google News. Jason, come on. Google News displays the title of the story and just a blurb for the description — much like a search engine. The title actually links to … guess where … the source article, yes, it links to the source article exactly like it should. Mixx and Digg follow suit in that the title links to the source as well.
Digg and Mixx do offer “permalinks” … and the only thing more you get on those pages is discussions from the comments. Google News does not have a permalink page for each news article.
I’m hoping you agree with what I’ve just said about Google News, Digg, and Mixx. Now let’s move onto Socialmedian. I’m going to visit the main page (not logged in) and what do I see … Headlines — some with description blurbs and some without. When I click on a headline I expect to be taken to the source article… but no, I’m taken to a page on Socialmedian where a huge chunk (including pictures) of a Mashable article has been republished (e.g. scraped or “enhanced”). Please tell me how this specific feature of Socialmedian is anything like Google News, Digg, or Mixx. It’s not, Jason, you can’t tell me it is because people will think you’re loony.
Beyond this huge content scraping/enhancing operation is actually something legitimate; Users are able to “clip” stories much like on Digg or Mixx.
But the content scraping/enhancing operation still exists and somehow Jason, you’ve been successful at getting users and investors to look past it. *pats back*
I think it was smart for you to take the offer from XING so shortly after coming out of beta … I honestly can’t see how any legitimate US based business would acquire Socialmedian seeing that there are some serious liabilites stemming from your content “enhancing” operations.
Enjoy Germany and I hope that with this new funding you’ll be able to drop the shady aspects of Socialmedian an focus on new features that will distinguish you from the rest.
-brandon
surely socialmedian gets its content from RSS feeds – so its at the publishers discretion as to what the user reads on other sites?
Brandon:
Users of socialmedian are able to use socialmedian’s tools to read their RSS feeds. Think of it as a shared RSS reader with other social tools. Publishers provide RSS fees which we then extract and parse, share with relevant topical networks and people. We only take short summaries of stories and images when provided in the RSS feed. We link out to every story. We do not search any sites. We do not do any scraping. We have a standard fair-use policy for how we display content.
Publishers overwhelmingly have told us that the socialmedian solution helps get their content in front of more peope who might not have otherwise discovered it.
Thank you for your comments. We take this very seriously and are always looking for ways to improve.
Brandon,
Congratulations to Jason and his team. I believe Jason has redefined the way a startup should operate, in good times or bad! All startups should take note of how he accomplished this. He writes about it on his blog. Brandon, maybe you could learn something.
As far as Allen is concerned; It wasn’t his content, as much as the comments that he was concerned about. He feels that he should have some ownership rights over the comments which are generated by his work, regardless of where they are generated. Obviously, he would prefer that all activity from his work take place on his site, but that’s not realistic. If anything, he should expect to see more of this, as information becomes more fragmented going forward. Once he excepts this, he can put his energy into lobbying the Ad Industry to create new delivery systems that work in this type of environment. They need to create systems that can deliver their message across different sites, platforms and networks! After all, the Video Podcasting community did this from the start and now have several viable solutions! The ground work has already been laid, and now its just a question of how badly the blogging community wants it.
I don’t know much about Xing, but I plan on learning as much as I can about them. They sound rather visionary to me, and I interested in seeing what they do from here ! Brandon, I don’t know if anyone ever told you this, so I will. You can’t knock success, so don’t try!
Michael
why is everyone happy? the only one who should be happy is jason goldberg, who did really well by this.
for xing, this is just another copycat move from a copycat site. ho hum. for all you europeans out there, please don’t claim this as a great european success – no one will be there to defend you when arrington makes fun of you again.
Time to grow up, dude.
What do you mean “all you Europeans”?
Pls. tell us what exactly has been copied by xing?
As you might know Xing is a quoted company, generating sales of c. EUR 35m and more important an EBITDA of c. EUR 14m (2008 estimates), which translates into free cash flow. 40% EBITDA margin sounds to me like their business apporach, which you might know is a bit different to other social networking sites (c. 10% of users are paying subscribers), can’t be too bad?
What has been copied by Xing?
Xing itself is a copy of LinkedIn, and the news feature has been part of LinkedIn for months. Their business model is slightly different and their margins are nice, but given the trouble they’ve had expanding outside a single country without making multiple acquisitions, it’s not exactly the most solid of businesses.
The “all you europeans” comment was a bit snarky, but was in reference to the pride in the “european company buys an american” one. There’s nothing wrong with the purchase, but pride should be saved for innovation, IMHO.
I began using the xing.com since 2005. But to me, it’s too high-grade.
This is great news!
I knew from the moment I joined that Socialmedian had the potential to become something big. And this acquisition is a prove of its value.
Always find great content through it. It’s got a really active community.
Congrats on your job as VP, Jason.
Best of luck!
@Adgenius
What happens to the engineering team? They if i remember correctly were not part of Social Median. It was an outsourced product development wasnt it?
More information about that is here: http://www.medi...parrow-systems/
The socialmedian team in Pune, India was a major shareholder of socialmedian, was a party to the deal, and will be a shareholder of Xing.
Given Goldberg is moving to Germany and will work on other stuff, I suspect socialmedian will be backburnered, fade away and/or die. Remember MySpace bought a news remixing service (Newroo), similarly without traction, for even more inexplicable cash before killing it. Social news is a busted concept.
Xing will continue to invest in socialmedian both as a standalone site as well as building integrated service offerings.
it means the social networking sites are just growing and gaining a great reputation now a days
regards
aartha
yawn – i mean, congrats to jason – but seriously, this is like another merger of the ‘also rans’ – gone within 12 months, another site that nobody will really use much…
Congrats, great Deal.
Happy holidays from the http://www.spirofrog.de/ team from Munich / Germany
Xing is listed and the shares is down by -1,41 % [-0,35]
A brilliant purchase by Xing. Jason has done a stunning job out of Pune in less than a year. To me he’s one of the finest rapid code builders on the web.
Full credit to him and to good see Xing aren’t going to let Linkedin and FB crush them. Nice deal Burkhard and Thomas.
@Thomas Power – Pune/India??
I thought they where based in NYC.
Best Thomas
Nice exit given the level of investment (time and money). Looks like a nice flip into a cozy job. I predict Goldberg will stay in Germany two years max and then do something else. Given his track record it should only take him a little over a year to do what needs getting done at Xing.
I personally would have liked to see SocialMedian stay in the game a little longer. I seriously thought that they would have been picked up by a U.S. based media company. I wonder if investment from the Washington Post basically prevent that from being an option?
Just to confirm I am reading this correctly:
“about 510,000 of which are paying about $90 per year for a premium account to get full networking functionality.”
510,000x$90=$45,900,000
$7.5M for that??? WTF is going on???
Great job on the sale! Very jealous, that’s a hard return to beat. What I’m more curious about is how they pitched it, smart!
all interface. lots of fake users (payed by the service) and minimal algorithm. what fool pays many millions for an obvious scam? the quality of the filtered message say everything. it will be a big pain to find out that this was mostly based on payed human work of a crowdsourced editorial team and seemingly not useful codebase here.
@ Pit,
I can assure you “fake” users are not responsible for our success with socialmedian. Each and every one of our subscribers is a real genuine person who takes great interest in being able to filter and personalize their news across a social network. Yes, these users have been very helpful in providing us with great feedback and feature requests, but this is because we have been willing to listen, and have always strived to create a product that our users desire.
Additionally, this would not have been possible without a development team that consists of several highly talented individuals who have worked incredibly hard to push quality code day in and day out. That said, it is to both our users and our developers that we can attribute our success.
Thank you for your comments and hopefully you’ll take the time to explore socialmedian and discover what it’s truly about. I’d be glad to show you around as well as listen to any input you might have. There is always room for improvement, and we will continue to keep that in mind over @ socialmedian.
mmmmm who said there is a recession ? i believe he would of got about 5k for this on SP ? crazy money with a crap name as well i mean wtf does it mean ?
mmmmm who said there is a recession ? i believe he would of got about 5k for this on SP ? crazy money with a crap name as well i mean wtf does it mean ?
but a great exit either way
I expect the Facebook (Connect) approach, which enables me to go out to other sites (e.g. Techcrunch) to do things other than those i can do on the site, to be more successfull than the Xing approach, providing me with an additional service which i may or may not be interested in.
(I believe the majority of Xing users will not.)
WOW! That rocks. It is not my favorite network but I use it from time to time. $7.5 million? Is that right?