Second-tier social network Hi5 has acquired app developer PixVerse for an undisclosed amount, just four months after launching its app platform based on the OpenSocial specification.
PixVerse offers several applications such as Pix Chat and Pix Wall, which are Flash-based and run on not only Hi5 but other social networks like Facebook as well.
The company was founded in February 2007 and is financially backed by Venrock. It was also one of the earlier adopters of Google App Engine.
EMI, which is looking less like a music label and more like a lawsuit label, is at it again. This afternoon they filed a lawsuit alleging “massive and blatant” copyright infringement by Hi5, VideoEgg and ten John Doe defendants to be named later. The core of the suit is over copyrighted EMI content that appears on Hi5, particularly music videos.
One person close to the litigation says that the parties have been negotiating with EMI for well over a year to avoid litigation, but that they were unable to reach agreement. The shakedown attempt before litigation is standard practice these days. But what is a little different here is that EMI is going deep into the supply chain to find other deep pockets.
VideoEgg, for example, provided video functionality to Hi5 in the past, but the deal ended in April 2008, and they no longer work together. The ten John Doe defendants are presumably other service providers, and/or executives of Hi5, VideoEgg and those other companies. The fact that EMI included VideoEgg in the lawsuit shows that they care little about current infringement - they just want a payoff for stuff that happened in the past.
VideoEgg CEO Matt Sanchez says that they comply with all DMCA takedown demands, but never received one from EMI. VideoEgg also used AudibleMagic , he says, to identify and proactively removed copyrighted material.
The lawsuit complaint, which was filed in New York, is below.
Is MySpace worth $3 billion, or $20 billion? It depends on how you value a user.
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.
In April, Facebook caught up to MySpace in worldwide unique visitors (actually nudging past it with 116.4 million unique visitors versus 115.7 million for MySpace). Now the worldwide comScore numbers are out for May and Facebook continues to blow past MySpace with 123.9 million uniques (up 6 percent), versus 114.6 million for MySpace (down 1 percent). Facebook also boasted more pageviews worldwide (50.7 billion versus 45.4 billion). Maybe MySpace’s redesign which just went live this week will pick things up for them again.
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
Bowing to the inevitable, Microsoft took a big step today towards data portability by announcing that Windows Live contacts can now be exported to social networks and other Websites. Its Windows Live Contacts API will work with Facebook, Bebo, Hi5, Taged, and LinkedIn to start. Members of those social networks will be able to import their Windows Live contacts (i.e., their Hotmail address book) so that they can more easily find or invite those people into their social networks. Microsoft is also launching a site, Invite2Messenger, for importing social networking contacts into Windows Live. Right now that only works with Facebook.
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.
Dow Jones VentureSource put out some data on Web 2.0 deals in the U.S. earlier this week that I’ve put together into these charts. The first one above shows how much money has been invested in Web 2.0 startups so far this decade. In 2007, venture capital poured into Web 2.0 companies at a record pace—$1.34 billion. That was up 88 percent from the $716 million invested in 2006.
But did Web 2.0 deals peak last year? Take out the $300 million raised by Facebook, and the amount invested was up only 46 percent, a marked slowdown from the 132 percent dollar growth the year before. (The amounts charted above, starting with 2001, are $68 million, $29 million, $79 million, $232 million, $716 million, and $1.343 billion)
The growth in the number of deals is also slowing. Last year, there were 178 Web 2.0 deals in the U.S. That was up only 25 percent, after doubling every year for the previous four years. And in Silicon Valley last year, the number of deals actually dropped from 74 to 69.
In 2007, the median deal size was $5 million, up 22 percent. And the median pre-money valuation was $10 million, up 66 percent (from $6 million in 2006). Both deal size and valuation for Web 2.0 companies remained below the average VC deal across all industries ($7.6 million and $16 million, respectively)
Here is a list of some of the biggest venture financings of 2007, including ones for Facebook, Ning, Zillow, Veoh, MyStrands, and Hi5. Slide’s $50 million isn’t included because that was in 2008. Hey, maybe things haven’t peaked after all.
OpenSocial is gaining some steam. In addition to Yahoo deciding to join the effort, hi5 is going to actually launch its developer platform based on OpenSocial on March 31. The big draw for developers will be to expand their reach globally. Hi5 is the third-largest social network in the world with 38 million unique monthly visitors. While both MySpace and Facebook each boast more than 100 million unique users per month (all numbers are from comScore), Hi5 reaches some different markets. It is especially strong in Mexico and Latin America, Portugal, and Thailand. As an incentive for Web developers to create apps for hi5, CEO Ramu Yalamanchi says:
For the first 100 apps, we are going to provide free hosting and translate them.
As with Facebook apps, developers will be able to place their own ads on the “canvas’ page that hosts the app. And they will be able to tap into the notifications, invites, messages, and friend updates on hi5 to try to make their app go viral.
By adopting OpenSocial, hi5 is hoping to make it it easy for developers to port their apps to or from other OpenSocial Websites (which will include MySpace, Bebo, Friendster, LinkedIn, Ning, Six Apart, and many others). Of course, OpenSocial has to get through its growing pains first. Yalamanchi notes:
The development of OpenSocial may have initially looked a little messy, but it is evolving to a point where there is a solid foundation.
To get things going, hi5 is hosting two simultaneous hackathons on March 15. One will be at the Googleplex in California, and the other will be at a university in Mexico. For more details on the hi5 platform, developers can go here.
New social network traffic figures released by Compete show that Fubar, billed as the “first online bar and happy hour” is the fastest growing social network, having increased its traffic by 3,272,217% over the 12 months to the end of February 2008, placing the network at 14th on the list of top 20 social networking sites (chart as shown).
Year on year MySpace hasn’t grown at all, managing to lose 1% of traffic compared to Facebook with 77% growth.
The other big gainers year on year include Ning at 4803% (sneaking in to 20th place) and Twitter with 4368%.
In the global race to be the top social network, MySpace and Facebook are neck and neck. In January, 2008, MySpace was still the biggest social network worldwide with 109 million unique visitors, according to comScore. But Facebook was close on its heels with 101 million. (Meanwhile, the data in the U.S. for Facebook at least shows a possible slowdown in growth).
While MySpace and Facebook are fighting it out for the top spot, back in the second pack some interesting sprints and scuffles are going on that are worth keeping an eye on. Everyone in that second pack (Hi5, Freindster, Orkut, Bebo, Imeem) are about a third to a quarter the size of the leaders in terms of worldwide unique visitors, so I’ve isolated their performance in the chart above (it is harder to see if you include Nos. 1 and 2, MySpace and Facebook).
In January, both Hi5 (No. 3, in red) and Friendster (No. 4, in blue), made moves to pull away from Google’s Orkut (No. 5, in green) and Bebo (No. 6, in yellow). The latter two maintained a more steady pace. Coming on strong from behind is Imeem (No. 7, in purple), which surpassed Multiply (No. 8, not shown). The chart below has most of the stats, except for the last two—Imeem had 17.8 million global visitors in January, 2008, a 477 percent annual growth rate (Multiply had 17.6 million, a healthy 203 percent rise from the year before).
For Hi5 and Friendster, global growth is a major part of their game plan. Friendster, for instance, which dropped off the radar for most of us in the U.S., is now the single largest social network in Asia. It’s top five countries are the Philippines, Indonesia, Malaysia, the United States (legacy members who never left, plus new growth among Asians here), and Singapore. Friendster has kept its growth going by launching fan profile pages for Asian pop singers, launching four new languages since September (Chinese, Japanese, Korean, and Spanish), and letting developers create apps for its site.
So does that mean that Friendster and Hi5 are worth more than the $1 billion Bebo is rumored to have sold itself for? Not necessarily. It depends on the actual composition of their members, click-through rates, and other financial factors. Generally speaking, advertisers like to target their campaigns by geography, and pay less for ads that target populations with lower per-capita spending power than in the U.S., Japan, or Europe. So not all members are worth the same to advertisers, and thus to potential acquirers. But as social networks become saturated here in the U.S., everyone will have to look overseas to keep growing.
Spanish language social networking site Sonico is the biggest social networking site you’ve probably never heard of before today. If you haven’t you wouldn’t be alone, it has zero hits in Google News as I write this post.
Buenos Aires based Sonico from FNBox launched in August 2007 with the usual social networking mix of message boards, profiles and networks based on school or workplace. Nothing remarkable, until you look at the numbers.
Sonico now has over 8 million registered users, and has recently launched a Portuguese version as well (so as to cover the rest of South America). According to Alexa the site now ranks at 167, and is in the top 50 sites in Colombia, El Salvador, Bolivia, Ecuador, Paraguay, Guatemala, Nicaragua, Peru, Honduras, Panama, Chile, Venezuela, Dominican Republic, Argentina, Cuba and Mexico. We can only get the worldwide figures from comScore and although it’s still below the leading second tier social networking sites, it’s still placed extremely well for a site that is just 6 months old.
Targeting the South American market is in vogue at the moment with players such as MySpace and Facebook now offering Spanish language versions, and smaller players such as Wamba trying to get a foot hold in a continent that has a growing online user base. Google’s Orkut is already big in Brazil and Hi5 is also popular locally. If their current growth continues Sonico will be a site to watch.
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 
Bowing to the inevitable, Microsoft took a big step today towards data portability by 
In the global race to be the top social network, MySpace and Facebook are neck and neck. In January, 2008, MySpace was still the biggest social network worldwide with 109 million unique visitors, according to comScore. But Facebook was close on its heels with 101 million. (Meanwhile, the data in the U.S. for Facebook at least shows a possible 
We can only get the worldwide figures from comScore and although it’s still below the leading second tier social networking sites, it’s still placed extremely well for a site that is just 6 months old.
