I don’t have comparable data to back it up, but anecdotally it seems the Web 2.0 generation is doing a better job at giving. Or at least Bebo founder Michael Birch is.

Birch has spent the last six months working with a team of two other people to build a social giving site for the popular organization, Charity:Water. It launched its beta site today, and with just a Tweet announcing it nearly 400 members have already raised some $3,000.

Charity:Water’s accountability and simplicity of purpose has made it a popular charity in New York, Hollywood and increasingly the Valley.  Here’s the value proposition: One-out-of-six-people on the planet doesn’t have access to clean drinking water. $5,000 buys an African village a well. Every dime you donate, goes to these wells. You can even watch the wells being tapped for the first time via Web video. The non-profit is turning three in a few weeks, and it’s raised more than $10 million over that time—much of it in $20 increments from a base of some 60,000 donors. It was Obama-fundraising-math before that was invented. As a result some 700,000 people in the world now have access to clean drinking water.

It was all started three years ago when Scott Harrison, reformed bad boy and Charity:Water founder, asked people to come to a huge New York party for his September birthday and donate $20 at the door instead of giving him a gift. He raised $15,000 and built six wells in Uganda. (They were cheaper than the wells Charity:Water usually builds because three were shallow wells and three were rehabs of existing wells.) Like any great accidental entrepreneur, Harrison knew he was on to something.

In addition to all kinds of creative fund raising, detailed in the video below, the following year, Harrison opened his birthday to everyone via the Web, asking them to donate $32 dollars, since it was his 32 birthday. That year, he raised $59,000 and other September birthday babies brought the total to $150,000, which went to wells in Kenya. Not bad, but they had to HTML hand-code each participant’s site. Pretty laborious work for a small non-profit.

The next year he got more September babies to “give up” their birthdays, and a company called InspEnv.com built them a site, but it wasn’t hugely social or scalable. Still 800 people “gave up” their birthdays and raised some $965,000 dollars to bring some 50,000 people clean water in Ethiopia.

But Harrison knew that the value of a lot of micro-giving campaigns like Kiva and the popular Facebook application, Causes, is rooted in the ability to make small donations super-easy to solicit and to make via existing online social graphs. He was trying to figure out sites that knew when a huge number of people’s birthdays were and after MySpace and Facebook, he came across Bebo. Early last year, he cold-emailed Bebo founder Michael Birch to ask if he’d be willing to send a note out to his September born users and Birch wrote back that it was “a bad time.” It was actually a great time for Birch—he was selling the company to AOL for $850 million.

Once the deal was done, Birch called Harrison and suggested he build him a site that could help people born in any month instantly “give up their birthdays” for Charity:Water’s mission. It was fitting since Birch’s next project was his pre-Bebo project, a site called Birthday Alarm. Nine months later, Harrison is about to turn 34, Charity:Water is turning three, and Birch has finished the site. For a free project, it’s a pretty nice looking site.

The recession makes this perfect timing. If you’re panicked about money and job loss, giving up your birthday is an easy way to give to those less-fortunate without having to spend a dime yourself. My husband has a September birthday and has already signed up. I plan to sign up for my birthday in December. You can create your own campaign in a matter of moments and with a few clicks, share it via all your existing social networks.

I’m sure the coders who were up until 4 a.m. last night will have mixed feelings about this, but this is one time I really want to see TechCrunch users break a beta site.

[Photo credit: Scott Harrison]

The story of charity: water – The 2009 September Campaign Trailer from charity: water on Vimeo.

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Translation – AOL is looking to spin Bebo off into an independent company, and they’ll retain an equity interest via AOL Ventures.

This is pretty much in line with what he told Erick during an interview last week. During that interview he distanced himself from the acquisition: “I was not here during the acquisition of Bebo. Social networking was an unclaimed category, and growing quickly.” The reason he placed it in AOL Ventures is so that it can “focus on improving the consumer product,” he said. Armstrong added that one of the purposes of AOL Ventures is “to keep things on track that have not been on track. ”

But he noted that there is another purpose for AOL Ventures as well. In areas where product synergies “have not been realized, it gives us an opportunity to take it out of AOL, to make it groomed, and maybe attract outside investment.” It was pretty clear he was talking about Bebo.

AOL acquired Bebo in early 2008 for $850 million. But the property has languished since then and it has not been integrated much at all into AOL proper. Bebo had 8.7 million unique visitors in the U.S. in June, 2009, 20 percent down from its peak in March, 2009 (comScore). Globally, it is holding up better, with 24.2 million uniques in May, 2009 down 12 percent since March, 2009. But if Facebook is worth $6 billion to $10 billion, Bebo might still be able to get a decent valuation if it can hold onto its users.

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Last week, Facebook took a $200 million investment that valued the company at $10 billion. So if Facebook is worth $10 billion, how much is Twitter worth? After all, Twitter turned down $500 million from Facebook late last year, and founder Evan Williams might not even sell it for $1 billion. But how about for $1.7 billion?

That is the valuation we come up with when we run Twitter’s numbers through our new social network valuation model. The model takes into account the size of each social network’s audience in different countries and the average online spending per capita in those countries. Using Facebook’s $10 billion valuation as a baseline, Twitter would be the fourth most valuable social network after MySpace ($6.5 billion) and Bebo ($1.8 billion).

Of course, that $10 billion valuation was for preferred shares, so $1.7 billion might be a valuation a strategic investor or acquirer would be willing to place on Twitter. If you use the $4 billion to $6 billion range Facebook’s common stock is being valued at in private sales, then Twitter’s valuation would come down to $671 million to $1 billion. And if you use Bebo’s 2008 valuation of $850 million as a benchmark instead, Twitter would be worth $781 million.

So there is your range: roughly $700 million to $1.7 billion. And remember, Twitter may still have scaling issues, but it doesn’t have all the costs that Facebook has in terms of storage and other capital expenditures. For one thing,Twitter isn’t keeping everyone’s photos on its servers—that is what TwitPic and Yfrog are for. On the flip side, there is also the question of revenues, which remains an open question for Twitter (and for Facebook, for that matter). Is Twitter going to make money from real-time search, corporate accounts, or maybe even figuring out a way to sell followers? Given how engaged a large portion of Twitter’s users are already and how it is becoming a hot testbed for opt-in marketing, it is not inconceivable that Twitter’s users will be worth more to advertisers than Facebook’s. But before we can find out, Twitter needs to pick a business model.

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We’ve now remodeled social network valuations based on current user numbers and Facebook’s most recent $10 billion valuation. The results are dramatically different.

Based on the original year-old model, if Facebook was worth $15 billion (their then-current valuation), MySpace, with far more U.S. users, was worth nearly $20 billion:

Our model takes Comscore data for available countries and regions. We’ve graphed each of 26 well known social networks with the data we have been able to collect. We’ve then calculated the average advertising spend (estimated by PriceWaterhouseCoopers in a recent report) for each person online in each of those countries. For example, in the U.S., the total 2008 estimated Internet advertising spend is $25.2 billion. We’ve divided that by the number of people online in the U.S. according to Comscore (191 million), to get an average Internet spend per person of $132. View the raw data and calculations here.

The U.S., by the way, is only the 4th most valuable market per Internet user, trailing The UK ($213), Australia ($148) and Denmark ($144).

We’ve then multiplied the average Internet spend per user in each market with the number of unique users each social network has in that market, essentially creating a “weighted average” based on the advertising dollars chasing users. If a social network has more users in the U.S., Japan, the UK, Germany, Australia, and other bigger advertising networks, they will have a higher weighted average valuation.

We believe this model is an effective way to rank various competing social networks. It bumps down networks like Orkut and Friendster who have tens of millions of users in markets with very little advertising spend, and bumps up networks with lots of users in higher value markets.

Based on this model, MySpace is by far the most valuable social network. Second place Facebook has just 75% of the value of MySpace (even though it now has more users), followed by Bebo (26% of MySpace value), Hi5 and Amebio. LinkedIn comes in at no. 11, at 6% of MySpace’s value.

The new model takes into account the dramatic rise of Facebook usage over the last year, the massive recent decline in MySpace usage, and less dramatic changes in the other social networks. We’ve also modeled out the various valuations with the old Bebo ($850 million) and LinkedIn ($1 billion) valuations as pivot points. We’ve also added Twitter to the list just for kicks.

The bottom line: If Facebook is worth $10 billion today, MySpace is worth just $6.5 billion. Bebo is worth $1.8 billion, Twitter is worth $1.7 billion and LinkedIn is worth $0.8 billion. Facebook also accounts for 37% of all social networking value points in our model. Another way of saying this: If Facebook is worth $10 billion, the value of the entire social networking industry is $27.1 billion.

Lots of charts and graphs below. The full model is here if you want to look at all the data (I recommend zooming unless you have super vision). Thanks to TechCrunch intern Dan Romero for running the new model.

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Before, Bebo was only available in English and for some reason also Polish, but now it will use IP-based geo-targetting to cater services in users’ mother tongues. It launched a latino site for U.S.-based users just last week.

Successfully rolling out social services across Europe is never an easy feat to accomplish, and Netlog and Facebook have a pretty strong foothold here, as does MySpace, although the latter appears to be struggling with their expansion strategy lately. Bebo is doing it the smart way – which is of course no guarantee for success – by teaming up with local media partners. Bebo is partnering with AlloCiné, RTL’s Clipfish, Telecom Italia owned Yalp!, Diagonal View and Preview Networks’ Filmtrailer, which will all be incorporated in Bebo’s Open Media platform. Bebo is planning to let these and additional media partners put a button on their websites that lets users share content on their profiles via status updates.

That’s the right strategy in my opinion, but they will find that competing against both the big boys who’re already present throughout Europe as well as the local players who’ve been around – in many cases – since the turn of the century, will be a long, hard battle. Those who have been following the developments in social networking services here in Europe, as well as the rough decline of online advertising budgets in general, would tell them the same.

We’ve reported in the past that AOL might be contemplating a sale of Bebo, but the press release makes it sound like they’re in fact heavily relying on Bebo for their social strategy instead:

Bebo forms the centrepiece of the AOL People Networks business unit. People Networks’ collection of community platforms help improve people’s lives by connecting them with everyone and everything they care about. People Networks does this through a web-based experience on Bebo.com, through desktop clients and mobile devices. At the heart of People Networks is the Lifestream, a real-time, platform for aggregating and distributing social feeds across mediums.

It will be interesting to look back in a couple of years and see if Bebo made the right decision at the right time, but I have my doubts about their capacity to effectively compete in Europe starting this late in the game.

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Social timelines are going mainstream (see AOL/Bebo), but startups are pushing them to the next level. Today, Lifeblob, the Indian startup working on ways for you to visualize your life on the net, is introducing a refreshed version of its social timeline creation tool. With it, you can easily patch together a visual representation of your life’s most memorable moments by timestamping certain events and enriching them with photos, text and videos. The end result can easily be shared on a variety of social services, or embedded into any blog or web page (example below).

It’s an invite-only service for now, but we have an unlimited amount of invite codes for you. It’s simply techcrunch and you can use it to sign up here.

Lifeblob is one of the investments of SeedFund, the Google-backed VC fund who actively looks for early-stage financing deals within the Indian startup community. The company raised its first round of financing of approximately $1 million from the fund in August 2008. It employs only 4 people for now and its business model is centered around advertising – which it will start rolling out after its general launch – and premium services (like branded timelines, etc.)

Public timelines on Lifeblob can be searched by other people with ease. If they’re not protected, anyone is able to both view and share the “lifeblobs” with the rest of the world (thanks to an integration with SocialTwist’s Tell-a-Friend service). Privacy settings allow your updates to be private or publicly visible, or for your friends only. You can also opt not to be listed in the Lifeblob directory at all, while still getting a shareable dedicated URL for your timeline (here’s an example for Michael Arrington).

Lifeblob isn’t so much about the concept of lifestreaming as it is about being able to visualize moments in a person’s life, while showing relations to other people whose moments intersect with theirs. Those intersections can take the form of people, places, events, associated tags, and so on. Each intersection shows up as a stacked tile, which launches the associated timeline when clicked on. For example, if Mike Arrington met up with Gary Vaynerchuk, Loren Feldman, and David Recordon after a conference (here’s the photographic evidence that this did indeed happen) and all of them would have indicated this in their timelines or been tagged, you’d get a timeline that shows that connection inside the interface and lets you explore more relations and other people’s lifeblobs simply by clicking around a bit.

It also works as a marketing vehicle. For instance, here is a timeline of all of Woody Allen’s movies, with connections to timelines for actors who have appeared in his movies. The UI is nice, but if you click any of the frames in the embed above with a screen resolution lower than 1024×768, you’ll immediately notice it still needs quite a bit of fine-tuning, as you can’t resize it properly and the menu items are all over the place. That said, it’s a pretty cool service reminiscent of tools like Dipity and Kronomy but with a more social approach. Definitely a tool I’d consider using to recap events, which I think it is most suited for. Turning your whole life into a lifeblob seems like a whole lot of work, unless you could auto-update from other services (right now, only Picasa is supported).

Here’s a screencast on how it works:

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In the first of several major product changes that will sweep through AOL in the coming months, the company is adding more lifestreaming capabilities to its Bebo social network today, including activity stream updates from rival social networks Facebook and MySpace. It is also introducing a visual timeline called a “Lifestory” that puts uploaded photos, events, and (soon) videos into a scrollable, chronological series of postage stamp icons at the top of members’ profile pages. Eventually, people will be able to subscribe to other Lifestories, including those from brands and bands, and embed them in their own profile pages or elsewhere. The timeline will also become the centerpiece of a Bebo iPhone app coming out soon.

The new features should all help to reinvigorate a site that has been in the doldrums lately. But Bebo’s biggest boost will come later this week when AOL migrates all of its AIM Profiles members over to Bebo on Wednesday and Thursday. This single move will more than double Bebo’s presence in the U.S., where AIM Profiles is even bigger than Bebo. According to comScore, Bebo’s unique U.S. visitors have been in decline the past few months to 5 million in January, whereas AIM Profiles has seen an upswing to 8.5 million. (See chart below). Worldwide, Bebo has 22.6 million monthly visitors.

At the center of AOL’s new product strategy is its “Lifestream Platform.” Think of it as FriendFeed for the masses, with personal AIM updates mixed in. Already, Bebo members are able to keep up with their friends’ activities on other sites, such as Flickr, Twitter and Delicious. Now Facebook, MySpace and YouTube are being supported as well. Whenever any of your friends do something on these services, their activity stream shows up on your Bebo page. Once you link an account to Bebo, it automatically keeps track of all of your new friends on that service as well. (The technology is based on AOL’s acquisition of Socialthing! last summer).

If you are an AIM member, all of your AIM buddies now seamlessly appear on Bebo. And through Bebo’s recently launched Social Inbox, you can get all of your lifestream updates, instant messages, and email in one massive feed.

But is this a capitulation to the two big social networks out there? No, says David Liu, the senior vice president and general manager of AOL’s People Networks:

We are not trying to connect everybody to everybody—that is Facebook—just to the content and people important to them.

Bebo is just the beginning. He plans on rolling out the Lifestream platform across revamped versions of AOL’s IM clients (AIM and ICQ), mobile apps, and even other Websites later this year. Regardless of any second thoughts that AOL may have had after buying Bebo, it is a central part of its strategy today. AOL has a huge and active group of millions of IM users that it has been wanting to turn into a social network for years. Now it has a place for them to create profiles and interact, but more importantly it can take the central communication model of social networks—the lifestream—and pour it back into its IM clients.

It is an ambitious undertaking. But will AOL’s take on lifestreaming be compelling enough to keep existing members from leaving? And more importantly, will it be compelling enough to attract new members from eleswhere on the Web?

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At the beginning of last December, Ning reversed course on its anything-legal-goes policy by declaring a prohibition on adult social networks. The reason? Porn wasn’t paying the bills; instead of attracting advertisers, it was scaring them away. Legal adult content was also begetting illegal content, which drew the ire of both authorities and lawyers with DMCA notices in hand.

Given the report released by CPM Advisors at the beginning of 2008, which suggested that Ning relied on adult content for much of its traffic, one might expect Ning to take a hit after shooing the smut out the door. But according to comScore traffic from January, that hasn’t been the case at all.

Ning gave adult networks until January 5th to pack up their bags and leave. That gives us the rest of the month to see how the network of networks fared without them. And it actually fared quite well, picking up almost 1 million unique visitors in the United States (from 3.94 million in December to 4.79 million in January). That pickup is almost enough to pass Bebo, which attracted 4.97 million Americans in January and barely managed to halt a downslide that surely didn’t make AOL happy.

What’s not clear is whether there’s been much dispute over what constitutes adult content. As far as we can tell – and as CEO Gina Bianchini outlined prior to the evictions – Ning hasn’t prohibited nudity entirely. Nudist social networks are still listed in its directory, for example, although all of them appear to be private networks. If you’ve run a Ning network with borderline content that has been either kicked out or allowed to stay, please let us know in the comments.

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Like many others, Triana Global claims to have been one of the first ad networks that started focussing on monetizing facebook applications after the social networking service started opening up for outside developers with the launch of Facebook Platform back in May 2007. Its biggest competitors are Adknowledge (which recently picked up both Cubics and Lookery Ads), Social Media, Offerpal Media and Appssavvy.

The service has managed to stay largely under the radar since its launch, and even when they started guaranteeing floor CPM rates of $0.15 and $0.08 CPC rates on standard banner sizes for new developers joining the network they seem to have gotten the silence treatment and were also downright criticized for developing their own Facebook apps besides acting as a social advertising network. It didn’t help that Triana Global claimed to have hundreds of applications in their network, which they later expanded to other social networks like MySpace, hi5 and Bebo, but never published a portfolio or customer reference list.

Either way, apparently the company was acquired by ShopIt in October 2008, and that startup is now relaunching the service as ShopIt Media, essentially providing a way for their users (1 million according to the company) to market the products they have for sale across a multitude of social communities. New publishers are being wooed with a 80% revenue share for all campaigns on Facebook, Ning, MySpace, hi5, Bebo and Orkut that are kicked off in February.

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As part of Time Warner’s $24 billion writedown of goodwill that it detailed in this morning’s fourth quarter earnings announcement, AOL accounted for $2.2 billion. That charge swung the business from a $2.0 billion operating profit last year to a $1.1 billion operating loss in the quarter.

The charge was related to reducing the “carrying value of goodwill,” which is what companies do when when an acquisition or investment is no longer worth what they paid for them. For instance, Google just wrote down $1 billion of its investment in AOL itself. But AOL can’t take a charge on a decline in its own value (at least, I don’t think it can). It’s $2.2 billion charge is an acknowledgment that it overpaid for certain acquisitions or investments. But which ones?

It doesn’t say in the earnings release, but its biggest acquisition last year was the $850 million it paid for social network Bebo. It is now clear that AOL overpaid. But how much does AOL think it is worth now? 200 million? I have calls and emails into AOL, but don’t really expect them to answer that.

Of course, there are plenty of other acquisitions AOL can write down as well. (We track $8.8 billion worth of AOL acquisitions going back years on CrunchBase). It’s other large acquisitions in recent years were all online advertising companies (buy.at, Quigo, Tacoda, Third Screen Media). Those could be worth less now as well. And last quarter AOL shut down some businesses, including Xdrive (that is $30 million right there).

AOL’s advertising revenues declined 18 percent in the quarter to $507 million (which was flat with the third quarter). And it’s total revenues, including from dial-up subscriptions, was $968 million, down 23 percent. For the year, AOL had total revenues of $4.2 billion, down about $1 billion. But it’s advertising revenues of $2.1 billion was up 6 percent for the year.

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AOL will cut its work force by 10 percent today, laying off approximately 700 employees, as a result of the struggling economy and a decrease in advertising revenue, we’ve confirmed with the company. AOL has 7,000 employees worldwide. The cuts have been added to our Layoff Tracker.

In a company wide memo (reproduced below), AOL CEO Randy Falco said the layoffs will be rolled out over the next few quarters and U.S. workforce reductions would be completed by March. He added that the company will eliminate merit pay increases in 2009.

While AOL may be considering a sale of Bebo, for now it is still the centerpiece of its People Networks business. Last July, TechCrunch reported that AOL reorganized its products group, including Xdrive, AOL Pictures, Bluestring and MyMobile, to shift focus and resources on other products including Bebo, MediaGlow and ad unit Platform A. The company also dismantled and reorganized its product management earlier this year; following the departure of Kevin Conroy.

The layoffs follow on the heels of Google’s write down of $726 million of its $1 billion investment in AOL, suggesting AOL’s total value is now $5.5 billion, compared to $20 billion at the time of Google’s 2005 investment in AOL.

Here’s the memo that Falco sent to AOL employees regarding the layoffs:

Dear AOL colleagues,

I’m writing to tell you about some important decisions we’ve made about AOL’s business and why we’ve made them.

The deepening economic recession has affected every corner of the economy, including our own. Online marketers have tightened their ad buying across the board, reducing their spend by hundreds of millions of dollars.

As a result, we will be reviewing our entire organization to further align resources and expenses against the real revenue opportunities in this difficult market. Part of this will involve consolidating groups to gain efficiencies that will unfortunately lead to head-count reductions. We anticipate this will result in a net reduction of our workforce of up to 10% over the next several quarters – and we will attempt to finalize all domestic actions by the end of March. Reducing our workforce is never easy, particularly in the current climate, but our goal in doing this is to provide our core businesses the resources they need to thrive. Please know that, as always, we’ll be doing everything we can to help and support those affected, including offering severance packages and other services.

To further keep employment costs down, we will also forgo merit pay increases in 2009. This is a painful decision, but one that many companies have prudently taken to help minimize the number of layoffs they have to make.

To provide some perspective on these decisions, right now we’re two years into a three-year turnaround plan. Since day one, our strategy has focused on building and growing mutually dependent publishing, advertising and social media businesses to take advantage of the shifting media landscape. We’ve worked shoulder-to-shoulder to make considerable progress during this time.

We acquired best-in-class companies across the digital advertising space (ADTECH, Third Screen Media, Lightningcast, buy.at, TACODA and Quigo) and integrated them with Advertising.com to build Platform-A, the largest, smartest display advertising platform in the world.

We grew our MediaGlow audience via an efficient content development model that in 2008 enabled us to launch more than 20 new sites that are generating significant page view (up 64% year over year in December), engagement (up 39% year over year) and unduplicated user (70+ million) numbers. This momentum will continue in 2009 with our goal of creating an additional 30+ editorially curated sites focused on consumer passion points.

We combined Bebo with our longtime community assets AIM and ICQ as well as newer acquisitions Goowy, Yedda and SocialThing, to build People Networks, gaining AOL a foothold in the critical social media space, with more announcements to come on the next phase of development in both the social media space and in the integration of social and publishing capabilities.

This progress continues to put AOL in a strong position to capitalize on our new business model when the recession ends.

In addition to focusing our investments, a successful turnaround plan also requires us to realign our cost structure against this three-pronged business model – making difficult decisions to cut costs in areas that aren’t critical to our growth. Splitting out the Access business improved the transparency of what’s working and what’s not, and allowed us to make better decisions about exiting businesses that weren’t performing while investing in growth areas. A successful turnaround plan also mandates we control costs, operate with healthy margins and position the company for sustainable growth. As you know, we’ve moved repeatedly to bring discretionary expenses in line to spare across-the-board job cuts.

But we’ve also had to make many hard decisions along the way. And this moment is no exception. We’re at a pivotal point in AOL’s transformation, and need to be even more strategically focused and operationally efficient as we weather the economic storm.

In addition to the head-count reductions and the 2009 merit pay decision, we are also making changes throughout the organization to improve efficiency and better align it to our three core businesses. This includes a review of our international operations and our global shared-services functions. In addition, we will continue throughout the year to carefully and thoroughly review all our products and services to make sure every one fully supports our strategy and has the potential for growth.

Finally, we are going to realize significant savings by continuing to consolidate our facilities – for example, moving from two buildings to one in Mountain View, from two floors to one in Los Angeles, and leasing unused space on our Dulles campus.

With these and other changes, we will take significant annual run-rate costs out of our business while, importantly, retaining the flexibility to invest in our growth strategy.

I know all this will raise questions, but I wanted to share as much as I could with you now. Senior management will provide more details as appropriate to their teams in the weeks ahead.

As difficult as things look right now, the economy eventually will turn around. Some companies will use this time prudently and make difficult decisions to come out of it in better shape – growing toward areas of opportunity, scaling back in others and maintaining a line on costs all around. Our only choice is to be one of these companies. With your continued hard work and dedication, we will position ourselves to emerge a stronger company ready to lead in a vibrant online market.

Randy

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Year end Comscore numbers for the U.S. audience are out. The first thing we checked? How the major social networks are doing.

Facebook, which became the largest worldwide social network in mid 2008, is still playing catch up to MySpace in the U.S. They have 54.5 million monthly unique visitors, says Comscore, compared to nearly 76 million for MySpace. But Facebook’s growth rate in the U.S. averaged 3.8% per month over the last twelve months. MySpace’s U.S. growth rate is 0.8% per month. That’s nothing to be ashamed of, but unless things change a lot, Facebook will overtake MySpace to become the largest social network in the U.S. in…2010.

At current growth rates Facebook will overtake MySpace in January 2010, a year from now. That is the month Facebook will reach 86 million U.S. users, compared to MySpace’s 84 million in January. Will this prediction be correct? Probably not, but it’s the best guess given today’s data.

It may actually take longer. Facebook’s growth rate had been increasing as the year wore on but dipped in December. As they get closer to MySpace it may become ever harder to catch up.

Also, even though Facebook is more than 2/3 the size of MySpace in the U.S. today, some key engagement metrics show more activity per user at MySpace. MySpace has almost two times the total time spent (17.5 billion minutes v. 9.3 billion minutes). MySpace generated 40 billion page views in December to Facebook’s 18 billion.

More data for other social networks is in the chart. Ning, starting from a smaller base, leads in overall growth rate, at 388% for the year and 14.1% monthly. Classmates is also growing quickly in the U.S. and had 16.6 million monthly unique visitors in December.

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Yet more evidence that the future of media is digital (in case there are still any doubters out there). In a report released this morning, boutique investment bank Jordan, Edmiston Group estimates that between 88 percent of the publishing and advertising industry’s revenue growth over the next few years will come from four sectors: Database & Information, B2B Online Media, Consumer Online Media, and Interactive Marketing Services. In other words, it will be coming mostly from the Web. In contrast, between 2001 and 2007, only 33 percent of industry growth came from these sectors. The other 67 percent came from traditional publishing businesses such as newspapers and magazines (formerly known as print media—the report does not cover TV, radio, or outdoor advertising).

To the extent that there will be any growth at all in the publishing industry, all you need to do is look at the multiples paid for different businesses to see where the growth is going to be. Last year, consumer online media companies sold on average for 4.1 times revenues and 21.3 times EBITDA. Database and information companies sold for 3.5 times revenues and 14.1 times EBITDA. Consumer magazines, on the other hand, sold for only 1.5 times revenues and 8 times EBITDA. Newspaper multiples were about the same (1.5X and 8.5X, respectively, see chart below).

In a year when the value of venture-backed mergers and acquisitions were down 51 percent, M&A activity in the publishing industry was down even more. Jordan, Edmiston counts a 68 percent drop in the value of publishing media deals from $104 billion in 2007 to $33 billion in 2008. Most of these are not venture-backed startups, but many of them were tech-related. Among the top ten media M&A deals in the report are CBS’s $1.8 billion acquisition of Cnet, eBay’s $945 million purchase of Bill Me Later, and AOL’s $850 million acquisition of Bebo.

The Top Ten Media M&A Dealsof 2008

1. Reed Elsevier buys Choicepoint ($4.1 billion)
2. WPP buys Taylor Nelson Sofres ($3.1 billion)
3. Hellman & Friedman buys Getty Images ($2.4 billion)
4. CBS buys Cnet ($1.8 billion)
5. eBay buys Bill Me Later ($945 million)
6. AOL (Time Warner) buys Bebo ($850 million)
7. Cablevision buys Newsday ($650 million)
8. Telvent GIT buys Data Transmission Network ($445 million)
9. Microsoft buys Greenfield Online ($421 million)
10. eBay buys Den Bia Avis and BiiBasen ($390 million)

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What were the top social media sites of 2008? ComScore came out with its worldwide traffic stats for November a few days ago (so these don’t include December). They are a mix of social networks and blogging platforms. Blogger, the orange line in the chart above, still rules the roost with an estimated 222 million unique worldwide visitors in November (up 44 percent from November, 2007). Facebook, the blue line, is on pace to pass it soon with 200 million unique visitors (up 116 percent). (Note, though, that this is more than the 140 million active users Facebook itself reports—go figure). MySpace is pretty steady at 126 million uniques. Wordpress is a close fourth and gaining with 114 million (up 68 percent). And Windows Live Spaces is down 22 percent to 87 million uniques.

ComScore keeps a list of what it calls “social networking” sites, but these include blogging platforms and other social media sites as well. While the audience for blogs is still showing healthy growth overall, Facebook stands out as the social gorilla taking share from not only other social networks but blogs and other social media as well.

Below are the top 20 sites on comScore’s social networking list. It is really more of a social media site list, which is what I’m renaming it for this post. It is not definitive, but it gives a good lay of the land. (Here is a similar ranking from 2007). Note on this list the stubborn persistence of Yahoo’s Geocities at No. 6, the rise of Yahoo’s Flickr at No. 7, Six Apart at No. 10, and the presences of Chinese sites like Baidu Space and 56.com. The real surprise, though, is document-sharing site Scribd at No. 16, with nearly 24 million worldwide uniques.

Top Social Media Sites (ranked by unique worldwide visitors November, 2008; comScore)

1. Blogger (222 million)
2. Facebook (200 million)
3. MySpace (126 million)
4. Wordpress (114 million)
5. Windows Live Spaces (87 million)
6. Yahoo Geocities (69 million)
7. Flickr (64 million)
8. hi5 (58 million)
9. Orkut (46 million)
10. Six Apart (46 million)
11. Baidu Space (40 million)
12. Friendster (31 million)
13. 56.com (29 million)
14. Webs.com (24 million)
15. Bebo (24 million)
16. Scribd (23 million)
17. Lycos Tripod (23 million)
18. Tagged (22 million)
19. imeem (22 million)
20. Netlog (21 million)

Here’s a screenshot of the actual data (as you can see, I rounded above):

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The Social Thing integration is an excellent way to track your friends. Unlike FriendFeed, where you track people and create a new friend list, Social Thing lets you simply enter your credentials for your favorite services (Twitter, Delicious, etc.). Social Thing then uses available APIs from those services to pull in activity from the people you already track there. It saves a step, and removes a lot of the clutter that comes with Friendfeed.

The recommendation engine is also a great feature. It determines video, music, groups and games that you may like based on stated preferences and aggregated data on what your friends are up to, as well as people like you and your friends.

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Six months ago, OpenSocial was nothing but a list of promised partnerships. But the social network application platform backed by Google has made a lot of progress since then as those partners started to go live with their OpenSocial Apps. First there was MySpace and Orkut, then Hi5, and most recently Friendster. All told, if you add up the various social networks that are now live with OpenSocial, it reaches a total of 350 million users. And it will soon reach 500 million, as four more social networks and services prepare to launch by the end of of September (see chart above).

Google’s Joe Kraus gave me an update today on OpenSocial’s progress. He wouldn’t say which partners would launch next, but by the size of that pink bar in the graph above, one of them is relatively large—about the same size as Orkut. (My guess is that it will be either Bebo or Six Apart). He also mentioned some partners, such as imeem, launched without ever contacting Google (thanks to Apache Shindig) and that at this point only 10 percent of the engineers hashing out the OpenSocial specifications are from Google.

So how many OpenSocial apps are actually being used? There are about 4,500 different apps so far, which have been installed more than 150 million times. I couldn’t get daily active user numbers across all OpenSocial partners, but for Hi5 about 50 percent of members use an OpenSocial app at least once a day. There are 1,800 OpenSocial apps on hi5 alone, which have been installed 66 million times, so that may be representative of OpenSocial usage in general.

In contrast, Facebook, which is open-sourcing its own platform for developers, has nearly 37,000 apps, which have been installed 715 million times. RockYou’s apps alone have been installed 124 million times on Facebook.

Despite the strides it’s made in such a short time, OpenSocial still has alot of catching up to do.

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It’s time to start comparing the big global social networks on something other than unique visitors and page views. I believe an effective way to value a particular user is based on the average Internet advertising spend per person in the country they live in. The higher the spend, the more value the social network can get out of the user by serving them advertising and other products. That means that, for now, users in a handful of key countries are worth far more in terms of revenue potential than those in the rest of the world.

We’ve begun to build out a model that looks at social network usage by country/region and compares that to available data on total Internet advertising spend in each of those countries. The model is then able to turn an apples-to-oranges comparison into an apples-to-apples comparison. The early results are surprising.

The ultimate financial value of any asset is, ultimately, what the market will pay for it. We have only a few data points to help us: Facebook, Bebo and LinkedIn are worth $15 billion, $850 million and $1 billion, respectively, based on relatively recent valuations (although only Bebo was actually sold completely; Facebook and LinkedIn raised investments at those valuations). The last valuation of MySpace was just $580 million, back in 2005 when it was acquired by News Corp.

Which valuation is most “correct?” It’s hard to say based on the data that’s been available to date, which is mostly just aggregate page view and unique visitor numbers from Comscore and other services. Based on worldwide unique visitors, for example, Facebook recently overtook MySpace to become the “largest” social network.

According to raw worldwide user number, the biggest social networks are Facebook, Myspace, Hi5, Friendster, Orkut and Bebo, in that order. But when you apply the model that we’ve created below, which takes into account where users live, the rankings change substantially. MySpace is by far the most valuable social network based on available data. A competitor like Orkut is worth only 1/20th of MySpace, even though it has nearly 1/4 the number of users.

Properly Ranking Social Networks

Our model takes Comscore data for available countries and regions. We’ve graphed each of 26 well known social networks with the data we have been able to collect. We’ve then calculated the average advertising spend (estimated by PriceWaterhouseCoopers in a recent report) for each person online in each of those countries. For example, in the U.S., the total 2008 estimated Internet advertising spend is $25.2 billion. We’ve divided that by the number of people online in the U.S. according to Comscore (191 million), to get an average Internet spend per person of $132. View the raw data and calculations here.

The U.S., by the way, is only the 4th most valuable market per Internet user, trailing The UK ($213), Australia ($148) and Denmark ($144).

We’ve then multiplied the average Internet spend per user in each market with the number of unique users each social network has in that market, essentially creating a “weighted average” based on the advertising dollars chasing users. If a social network has more users in the U.S., Japan, the UK, Germany, Australia, and other bigger advertising networks, they will have a higher weighted average valuation.

We believe this model is an effective way to rank various competing social networks. It bumps down networks like Orkut and Friendster who have tens of millions of users in markets with very little advertising spend, and bumps up networks with lots of users in higher value markets.

Based on this model, MySpace is by far the most valuable social network. Second place Facebook has just 75% of the value of MySpace (even though it now has more users), followed by Bebo (26% of MySpace value), Hi5 and Amebio. LinkedIn comes in at no. 11, at 6% of MySpace’s value.

Valuation Ranges

The real-world revenue numbers being reported for the big networks supports this approach to valuation and shows a direct tie between monetization efforts and where a network’s users are. MySpace is estimated to have generated $755 million in revenue over the last year. The (now) larger Facebook, with a far higher percentage of users in less lucrative markets, will generate just $255 million this year:

EMarketer estimates that MySpace will post $755 million in revenue in the fiscal year ending June 30. MySpace would not comment on the estimate. About a third of the revenue is expected to come from the Google ad pact. For the year, Facebook is estimated to earn $265 million in ad revenue.

Since we have three recent data points valuing social networks (Facebook at $15 billion, Bebo at $850 million, LinkedIn at $1 billion), we can start to apply valuation ranges based on the model. Facebook’s 10.2 million value points and $15 billion valuation puts a $1,467 value on each value point. LinkedIn is valued very similarly, at $1,325 per value point. Bebo, with lots of users in the rich UK market, appears to have been undervalued at only $241 per value point.

Based on these three publicly available data points we’ve created value ranges for each of the top 25 worldwide social networks. There is a very wide disparity (MySpace, for example, is worth between $3.3 billion and $20 billion, based on which comparable you look at). But it does yield very interesting data. For example, If Facebook and LinkedIn were valued similarly to Bebo, they would be worth just $2.5 billion and $182 million, respectively, far less than what their investors recently paid for a piece of them.

Interestingly, the recent sale of Polish social network Nasza-klasa for $92 million appears to be right in sync with Bebo’s price. The model estimates its value at $91 million based on Bebo’s valuation metrics.

There are some big flaws with the model and analysis in its current state. First, LinkedIn may be in a different class of network, given that all of its users are business focused (no super-poking going on there). As a result, it may be able to monetize users far better than its competitors, no matter what geographic market is being looked at. Still, we’ve decided to leave it in as a data point, with that caveat.

The model itself needs more data. The user numbers are based on April Comscore. We will shortly revise it with the May numbers, although the absolute rankings probably won’t change. More importantly, some big markets are not included yet. The Chinese Internet advertising market, for example, is estimated to be $2 billion in 2008, yet they are not included (mostly because I can’t find data on user numbers for the networks). Also, the Philippines isn’t broken out separately, again due to data availability issues (although the total Internet advertising market in the Philippines is just $3 million this year, so it won’t affect the rankings materially even though Friendster is so strong there). Finally, Russia is currently grouped with “the rest of Europe,” and needs to be separately broken out – it has a large and growing online advertising market and lots of users, so that update may affect the mid-level network rankings.

The advertising spend model is just an estimate and from a single source. I’m less concerned with this data since it doesn’t matter to the model if the estimates are absolutely correct. If the estimates are wrong by different rates in different countries, however, the model will break. If we find better relative data between countries, we’ll update the model with that data. But for now, the PriceWaterhouseCoopers data seems to be pretty good.

Finally, this model doesn’t take into account execution at the company level. Two very similar networks may monetize vastly differently based on methods of advertising and even the brute effort and passion of the employees. This model obviously doesn’t take that into account.

I also note Andrew Chen’s analysis last week which takes a similar approach to this using Google Trends data instead of Comscore. The Google data isn’t granular enough to really dig in to relative values, however, and he was lacking current and deep data on average Internet spend. Still, I agree with his methodology.

As I wrote at the very end of this post, you have to consider the current monetization value of users when comparing social networks. Raw user numbers are pointless without it.

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In the U.S., though, which is the biggest advertising market, MySpace is still well ahead of Facebook, with 73.7 million unique visitors in May compared to 35.6 million for Facebook. And that number for MySpace is up 2 percent from April, whereas Facebook’s had 0 percent growth. So it remains to be seen if and how fast Facebook can catch up in the U.S.

As for the second-tier social networks, they have fewer than half as many visitors. Here is the breakdown for May:

Worldwide Unique Visitors To the Top Social Networks

Facebook—123.9 million
MySpace—114.6 million

Hi5—49.6 million
Friendster—38.1 million
Orkut—32.2 million
Bebo—25.1 million

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It was the first chance I’ve had to congratulate him in person for the $850 million sale of Bebo to AOL earlier this year. Most of our conversation was around the future, and what the Bebo founders will do next.

Birch was recently interviewed by the Telegraph and spoke about the history of Bebo. He was vague on his plans for the future, though, saying “I have thought about what I will do and the conclusion I have come to is that I will get bored quite quickly with day time television. I need to do something that continues to be challenging and interesting. I don’t have any great ambition to go out and make money. But I am still fascinated in starting up businesses and starting it in a way and running in a way that I want to do it.”

But Birch was more specific when we spoke, saying he’s planning on spending time growing Birthday Alarm, a site he founded with his wife Xochi Birch and brother Paul Birch in 2001.

Birthday Alarm is a relatively simply service – users create an account and are then prompted to send an email to all their friends asking them to simply tell the service their birthday. Birthday Alarm then notifies users by email or SMS when a friend’s birthday is coming up.

Lots of people who get those emails end up signing up for the service, too, which has allowed it to spread so virally (Birch says the service had 100 million users at one point). And the business model is pretty straightforward – offer users the ability to send birthday ecards for $14/year.

When the Birch’s started focusing on Bebo, attention to Birthday Alarm naturally waned. The service has since dropped to 50 million active users. But the number of paying users, around 300,000, has remained flat over the years. Those users bring in around $4 million/year in fees, plus additional revenue for advertising.

Birch thinks they can regrow the already profitable service by refining the product and focusing on marketing. This, at least, will keep them busy during the non-compete period they agreed to in the Bebo sale. During that time, he can’t set up any new social media-related business.

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If you try to buy an ad on Facebook, there are certain words that are taboo. Any ads that contain four-letter words are automatically blocked. So too are ads with the names of competing social networks “MySpace,” “Friendster,” “Hi5,” , or “Orkut.” (Curiously, “Bebo” and “OpenSocial” go through just fine, as does “Microsoft,” “Yahoo,” “Google,” and “AOL”).

Okay, so Facebook doesn’t want to run ads for some of its competitors. But why is 3Jam blocked? The startup offers an SMS service that lets people send multiple text messages at once, and it even has a Facebook app that does the same thing.

CEO Andy Jagoe was befuddled when he tried to create a Facebook ad to test a new product, only to find out that the term “3Jam” was also blocked. (The product actually sounds pretty cool: it will be a way to send and receive text messages for free while you are online, and then route them to your phone when you are offline). Says Jagoe:

It seems crazy to think that they consider us competitive. This is kind of weird. It is like censorship.

It does seem weird. What other startup names or products are blocked by Facebook?

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Howcast, the instructional video site founded by three ex-Googlers, today announced that it has formed distribution agreements with AOL, Metacafe, Bebo, and blip.tv.

Howcast provides professionally produced instructional videos that range from “How to Make Sushi” to “How To Make a Water Gun Alarm Clock“. Many films come from the site’s Directors Program, which pays qualified members a small fee to produce guides that follow a supplied Howcast template. Directors receive increased compensation through a rev-share system for especially popular videos.

Howcast says that the new distribution deals will significantly expand its audience. The site had previously established distribution agreements with Myspace, YouTube, Verizon FiOS TV, Joost, and ROO.

Howcast has a number of competitors in this space, including 5min, Videojug, and to some extent, Instructables.

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Although Microsoft is part of the Data Portability Workgroup, this is a separate effort, confirms a spokesperson. So much for industry standards. But this is an important step in allowing people to take their contacts with them no matter where they reside, whether in their email or social networks. Instead of startups scraping Hotmail to ingest contacts, now they have a legitimate way of doing so.

In a way, this is a bit of a catch-up move. You can already import contacts easily from Gmail into services such as Facebook, Friendfeed and others. Maybe Microsoft had a touch of Gmail envy or were concerned about being left behind. At a certain point, an email service that doesn’t let you export your contacts could really be a damper on your social life elsewhere on the Web.

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British musician Billy Bragg argues in the New York Times today that some portion of Bebo’s $850 million sale price should go to the musicians who uploaded their music to the site.

Note that Bragg neatly sidesteps the fact that music was uploaded to the site by artists (or their labels) themselves, with full knowledge that they would not receive payments of any kind (except free marketing, of course, and access to Bebo’s tens of millions of music loving users).

His argument is based on the notion that Bebo’s success was based on the availability of streaming music on the site: “The musicians who posted their work on Bebo.com are no different from investors in a start-up enterprise…Now that the business has reaped huge benefits, surely they deserve a dividend.”

Bragg also tries to take direct credit for Bebo’s success:

Mr. Birch has cited me as an influence in Bebo’s attitude toward artists. He got in touch two years ago after I took MySpace to task over its proprietary rights clause. I was concerned that the site was harvesting residual rights from original songs posted there by unsigned musicians. As a result of my complaints, MySpace changed its terms and conditions to state clearly that all rights to material appearing on the site remain with the originator.

A few weeks later, Mr. Birch came to see me at my home. He was hoping to expand his business by hosting music and wanted my advice on how to construct an artist-centered environment where musicians could post original songs without fear of losing control over their work. Following our talks, Mr. Birch told the press that he wanted Bebo to be a site that worked for artists and held their interests first and foremost.

Bragg does attempt to argue his case, primarily by (1) saying that social networks are as much to blame for declining music sales as the people who are downloading songs in violation of copyrights, and (2) saying that arguments that social networks are doing musicians a favor by marketing their music are “disingenuous.”

Both arguments have holes in them so large you could drive a BitTorrent stream through them.

Social networks have absolutely nothing to do with the decline in music sales. The fact that recorded music can be reproduced at a zero marginal cost is why music sales are declining. You can hate that or love that, but it’s simple economics that drives it.

And in fact the argument that social networks actually provide free marketing to artists is not disingenuous. In fact, it’s quite correct. Bragg notes that radio stations pay royalties for playing songs, even though they also obviously provide free marketing for artists.

His argument isn’t quite factually correct – In the U.S. royalties are paid by radio stations to song writers but not artists (it comes to about $450 million per year). In most of the rest of the world, though, artists are paid royalties. But a much more interesting analysis of the radio industry is the very strong desire for labels and musicians to pay them to play songs. Payola is now illegal, but the practice almost certainly continues. As recently as 2005, former New York State Attorney General Eliot Spitzer prosecuted payola-related crimes in his jurisdiction.

Recorded music is nothing but marketing material to drive awareness of an artist. Websites that bring that music to listeners are doing artists a favor. In fact, they’re doing them a favor that they should (and will) be paid for. Young artists and songwriters in particular benefit from these services – Until a few years ago they had almost no way to break into the mainstream without getting a label to promote them. Now those walls are being torn down, and Bragg has the audacity to complain about it.

I think the main reason Bragg wrote this article is jealousy over the massive success of someone he once met – Bebo cofounder Michael Birch. The paragraphs quoted above where he takes credit for their business model reveal his angst in that regard. Bragg had absolutely nothing to do with Bebo’s $850 million payday. And everything else he wrote in that article is dead wrong, too.

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But was Bebo the right one, and did AOL pay too much for it? Those are questions that other AOL executives below Falco and Grant are asking themselves, reports Silicon Alley Insider. The concerns of the senior executives who actually run AOL (and reportedly were not consulted on the top-secret acquisition) include: the general difficulty of making money placing ads on social networks (see Google’s missed quarter), “flattening traffic growth at Bebo” (see chart below), overly-rosy revenue projections for Bebo that might have been three times too high, and the likelihood of losing Bebo’s most talented employees (the founders are already out of there).

From my own sanity-checks with sources, there is definitely the sense that AOL was not Bebo’s first choice. Initially, it was aiming for a valuation above $1 billion. But then the ground started falling out beneath it, and AOL’s $850 million offer started to look real good. AOL was a desperate buyer. Even if it bargained Bebo down on price, it may still have paid too much. Bebo’s growth is indeed flattening relative to other global social networks like Hi5 or Friendster. And while social networks generate a lot of pages, they are not yet particularly valuable pages.

There is a silver lining here, though. If AOL can use its targeted advertising assets (Advertising.com, Quigo, Platform A) to make that Bebo inventory pay out, it will surprise everybody. And that will be good for Platform A because it then will be able to grab more advertising business from other social networks. (That is, if New York State does not outlaw targeted advertising before then). The likelihood of that happening is not great, but AOL employees need at least a glimmer of hope to keep showing up to work every morning. (I do what I can).

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AOL has acquired social networking site Bebo for $850 million in cash. AOL CEO Randy Falco (left in picture) sent an email to all AOL employees this morning. Allen Stern’s press call notes are here.

This is an acquisition we called last month (when I’m told they first signed a term sheet), although frankly the leads dried up on who was acquiring them in the last couple of weeks (it turns out the two companies were furiously negotiating, even until this morning). AOL and Bebo have been in talks since September 2007.

Investment bank Allen & Co. has been shopping Bebo for some time. A number of potential buyers passed on the company, including News Corp., Microsoft and Google, our sources say. Yahoo may have also taken a long look, but recent woes probably prohibit it from doing any large transactions.

AOL’s intention, they told press in a briefing call this morning, is to marry AIM and ICQ with a proper social network. At a high level, AOL is saying they are basing much of their go forward social networking strategy around AIM. Layering in Bebo, they say, lets people communicate both synchronously and asynchronously. The goal is to allow people to both express themselves and extend existing relationships. AIM users have 100 buddies on average. Bebo’s platform allows those users to share and distribute media as well.

AOL’s also talking about their Platform A advertising platform which can blend big brand advertising along with performance. Bebo’s page views will be enticing to those brands to the extent they can track how those ads do.

Current President Joanna Shields (middle in picture) will continue to run Bebo and will report to AOL President Ron Grant (right in picture). Founders Michael Birch and Xochi Birch will shortly be leaving the startup, apparently. Rumor has it, though, that Shields has effectively run the company for some time. Bebo was originally launched in 2005.

Bebo is the second largest social network in the U.K. (its largest market) after Facebook. Recent Comscore data says Bebo has 22 million unique visitors and 11 billion page views; AOL said Bebo users spend an average of 40 minutes a day on the site in a press briefing. The company claims 40 million users.

The deal must clear U.S. and EU antitrust hurdles before it closes. Bebo had raised just a single $15 million round of capital from Balderton Capital (formerly Benchmark Capital Europe) in May 2006.

As an aside, and despite rumors of their possible sale, AOL is clearly putting a massive effort into transforming the company from a dial up broadband provider into a company that has the competitive fire. The opening of AIM, mentioned above, is just one indication. The company has been releasing genuinely innovative new products and has also made a number of smaller strategic acquisitions over the last year or so. And there are lots more to come, apparently.

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