The new hi5 still retains many of the same key features you’ll find on any social network — your profile consists of a photo or avatar, you can browse through your friends, and so on. But there’s clearly a much bigger emphasis on the site’s games and virtual currency (called ‘Coins’) than there was in the past. In the old design, the Games link was buried in the header, which also included links to Photos, Messages, Applications, and more. Now Games and Coins are both featured just as prominently as the link to your Profile and Friends. If it isn’t the first thing people will click on, it’s probably the second.

Hi5 is not especially popular in the United States compared to Facebook, but it’s quite popular abroad, with over 60 million monthly unique visitors (only 10% of which come from the US). This would normally pose a challenge to developers who would have to figure out how to engage in transactions with users around the world, but hi5 has that taken care of. The social network has set up 60 different payment systems for users worldwide, all of which convert to hi5 Coins. And aside from the benefits of making international payments relatively painless, virtual currencies tend to lead to more impulse buying (it’s much easier to toss away a few Coins than a few dollars). hi5 takes a 50/50 rev share of any money spent in a game.

Even before the redesign hi5 games section has been doing very well. It only launched in February and already accounts for around 1/3 of the site ’s traffic, and direct user payments through the game already account for 15% of hi5’s revenue. Expect to see that number jump substantially over the next few months.

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Even with a reasonable amount of overlap accounted for, these are significant numbers, albeit in countries where potential advertising income is generally much lower than it is in the U.S. and Europe.

OLX (a competitor to Craigslist in the United States) and hi5 (a competitor to the likes of Facebook and MySpace on a global level) claim the fresh partnership serves to consolidate both companies’ hold on the Latin American market, while making way for accelerated growth in the rest of the world.

As part of the agreement, hi5 will implement OLX features that include the ability to display ads on a user’s profile page and to see friends’ ads, as well as a feature to tell friends about their own ads via newsfeeds. OLX will also allow users to include videos and pictures in classified listings, comment, post/view listings in over 39 languages and 90 countries, and access the site from mobile devices. The latter two features are clearly meant to appeal to a large international user base.

Oodle, another major player in the online classifieds space, has been scoring similar deals recently with social networking services and portals like Facebook, MySpace and AOL.

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Even on the Web, world dominance must be achieved one country at a time. While Facebook has long been the largest social network in the world, and should soon pass MySpace in the U.S., it is not the largest social network in every country. The map above created by Vincenzo Cosenza resembles more a game of Risk, with Facebook sweeping across the globe from the West.

Using Alexa and Google Trend data, Cosenza color-coded the map based on which social network is the most popular in each country. All of the light green countries belong to Facebook. But there are still pockets of resistance in Russia (where V Kontakte rules), China (QQ), Brazil and India (Orkut), Central America, Peru, Mongolia, and Thailand (hi5), South Korea (Cyworld), Japan (Mixi), the Middle East (Maktoob), and the Philippines (Friendster).

Apparently, Alexa already thinks that Facebook is larger than MySpace in the United States. And Maybe it is, or maybe Cosenza’s isn’t using the best data. But I love being able to visualize market dominance on acountry-by-country basis. I wonder what the map would look like using comScore data, some of which can be found in our recent social network valuation model.

Below is an interactive version of the map.

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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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Social network hi5 is launching an instant messaging service, hi5 IM, adding real-time interaction for users. hi5 IM, which is similar to Facebook Chat, Facebook’s instant messaging feature, shows users which friends within their network are online and runs directly in any hi5 user’s browser. In addition to one-on-one chat, users can change their status, write updates, post profile comments, and share photos through hi5 IM.

It appears that the social network is looking to amp its “entertainment features” to gain more users and is also focusing on engaging users though casual gaming and micro-payments. Hi5 also recently partnered with Paymo to power mobile payments for virtual goods. The social network is hoping that real-time chat will compliment casual games, and interaction with other content on the social network.

hi5 IM also enables users to share and express their emotions through animated hi5 “star” emoticons. The star, derived from the hi5 logo, represents a variety of virtual gestures and emotions, such as sad, happy, laughing, crying, playing dead, angry and shy. Last month, the self-described “world’s leading social entertainment web site,” got a new CEO, Bill Gossman, formerly the CEO of the online advertising service Audience Science. And at the end of March, the social network hi5 cut a large percentage of its staff following the failure of a new round of funding to materialize.

With nearly 60 million active users, hi5 has a good sized audience, but it’s long been far behind the big boys in the social networking space, MySpace and Facebook. Facebook is the most popular social network worldwide with 294.7 million unique visitors, with MySpace coming in second with 125.7 million unique visitors. hi5 gets about 63 million monthly unique visits worldwide but only 3.7 million of those are from the U.S., according to ComScore’s March stats. And a good chunk of ts audience is in countries where it is hard to attract advertisers,

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In the release (below) you can read between the lines to see where Hi5 is looking to head as it continues on at a smaller size. The site, is now focusing on forms of entertainment like casual gaming and micro-payments. Hi5 also recently partnered with Paymo to power mobile payments for virtual goods. Gossman, who obviously has experience in monetization, will now try to monetize hi5. The company’s former CEO, founder Ramu Yalamanchi, will stay on and take the roll of Chief Product Officer.

With nearly 60 million active users, the service has a good sized audience, but it’s long been far behind the big boys in the social networking space, MySpace and Facebook. Facebook is the most popular social network worldwide with 294.7 million unique visitors, with MySpace is coming in second with 125.7 million unique visitors. hi5 gets about 63 million monthly unique visits worldwide but only 3.7 million of those are from the U.S., according to ComScore’s March stats. And the problem with its audience is that a good chunk of it is in countries where it will be hard to attract advertisers, as VentureBeat’s Eric Eldon notes.

Below, find the press release:

San Francisco, CA; April 24, 2009 — hi5, the world’s leading social entertainment web site, today announced the appointment of Bill Gossman as CEO to lead the company through its next phase of growth. Ramu Yalamanchi, founder and CEO since the company’s inception in 2003, will assume the role of Chief Product Officer to lead the company’s product strategy in the social entertainment space.

This change augments the hi5 executive team with seasoned leadership, particularly around monetization of the company’s huge global audience of over 60 million monthly uniques. As the former CEO of Audience Science, Bill brings considerable expertise in online advertising, behavioral targeting, and other forms of audience monetization. He has also built and led several companies through similar stages of their organizational growth.

“The founding team at hi5 has built a tremendous asset in one of the world’s largest online communities, and a truly global distribution and monetization platform for games and other social entertainment content,” said Gossman. “I’m excited to be joining the organization to help leverage that asset by focusing on our continued leadership in the social entertainment space and building a scalable, highly profitable business.”

As Chief Product Officer, Ramu will focus his operational responsibilities on leading the product and engineering organizations to deliver innovative, world-class features that differentiate hi5 in the social entertainment space – particularly extending hi5’s successful micro-payments infrastructure and maximizing that revenue stream for the business.

“It is great to have Bill joining hi5 at this exciting stage of our business,” said Yalamanchi. “We have been incredibly successful in building a huge global audience and pioneering the social entertainment space. Bill brings highly applicable, stage-relevant leadership experience, particularly in monetizing online traffic and building scalable sales organizations, that will help take our company to the next level.”

With over 25 years experience leading high-growth organizations in the digital media space, Bill helped pioneer the behavioral targeting category at Audience Science and is an expert in monetizing online audiences. His previous positions include CEO of Sabrix and founder and COO/CFO of @mobile, a wireless Internet software company sold to Software.com for $400 million. Bill is a former partner and current executive in residence at Mohr Davidow Ventures, the lead investor in hi5.

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Two of PlaySpan’s payment solutions will be used (PayByCash and Ultimate Game Card), getting the most out of the variety of payment methods used across the globe, which is essential for hi5 since the large majority of its users are located outside the U.S (about 40% speaks Spanish, for example). The company’s subsidiary PayByCash is able to support approximately 80 payment methods in 180 countries and boasts an extremely low fraud rate, and the addition of hi5 to its customer reference list further validates the alternative micro-payment platform.

Hi5 will also offer its subscriber base the ability to buy and use PlaySpan’s Ultimate Game Card, a pre-paid game card available for purchase online and in more than 21,000 retail stores across the U.S. and Canada (and apparently soon expanding to other countries).

For actual transactions on the social network, the company continues to bet on hi5 Coins (which can now be paid with using PayByCash), a virtual currency it launched late last year, which I’ve personally always considered a strange move considering it requires users to get accustomed to using a currency that can’t be used for anything else outside of the network while standard ‘gift credits’ seem to work just as well.

Either way, the company is clearly trying to ramp up its revenue streams, recently launching a casual gaming section which hi5 said would prove very important for making money in the long run, and partnering with Paymo to power mobile payments for virtual goods. The partnership with PlaySpan once again shows that monetization through anything but advertising is the key focus over at hi5, and recent reports show that that may be the best strategy worth pursuing.

You may remember Habbo, which we reported pulled in $74 million in revenues last year, mostly from virtual goods, or the market analysis on Chinese social networks, whose business models have long relied mostly on sales of virtual gifts rather than online advertising. Expect to see more of these reports in the future.

Finally, it’s also worth noting that hi5 has been on a cost-cutting spree, recently slashing an estimated 50% of its workforce.

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Global mobile payments network Paymo and social network hi5 have partnered to let members in 24 countries use their mobile phones to purchase hi5 Coins, hi5’s virtual currency. Countries where Paymo will be made available to hi5 users include the U.S., Canada, France, Hong Kong, Thailand, Russia and Colombia.

Paymo’s mobile payment system doesn’t require users to have a credit card or bank account. Users enter their cell phone number on the site, reply to a Paymo text message and then all virtual charges on hi5 are automatically charged to the user’s monthly cell phone bill. It’s pretty easy and similar to UK mobile payments service, Zong. Paymo says that over 75 percent of the online community worldwide does not have a credit card but 3 billion consumers own a mobile phone. With that in mind, the company is hoping their system, which avoids credit cards or bank accounts, will take off.

Unlike some of its competitors, such as Zong and Mobillcash, whose systems are limited to certain regional areas, Paymo can be accessed in 45 markets around the globe, enabling mobile payments in Europe, North and South America, the Middle East, Africa and Asia. Paymo recently expanded service in the U.S. after striking deals with mobile carriers AT&T, T-Mobile and Virgin Mobile to allow users to make online purchases using their phone.

Mobile payment systems are gaining traction from social networks, but the issue of costly fees charged by mobile carriers to the payment systems (which are then passed on to the consumer) remains a serious problem. Paymo says that it typically charges users a transaction fee of 10% of the purchase price. The company adds that different cell phone carriers charge varying fees but most are in a range of 20% to 40% of the purchase price, which is a pretty large amount in transaction fees. As we said in our earlier analysis, this could pose a significant roadblock to these types of services, which channel user payments through mobile carriers. It appears that it would be hard to sustain these fees in the long term when transaction charges could be drastically decreased if payment networks accepted credit card or bank account payments. Still, with such a vast coverage area of the world, Paymo appears to be ahead of some of the more regional services. Paymo says that Facebook, which has a widespread international following, would be the next partner it hopes to land in the social network space.

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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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The social networking service says hi5 Games will become an important part of its monetization strategy, with the help of their recently launched virtual currency that allows members to buy virtual gifts using real money in a digital form (still with us?). Users will eventually be able to utilize the virtual currency, called hi5 Coins, for direct transactions such as premium content, advanced gaming features and status upgrades. Hi5 is also experimenting with “new and immersive” advertising options on hi5 Games, which it says will allow brands to better engage their target audience.

Hi5 has recently laid off a good portion of its staff but continues to be a very relevant player in the social networking field; it is still the third largest social network after Facebook and MySpace according to Comscore.

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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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Social networks need to find a way to make money fast. Online advertising never really worked well on social networks in the first place, and with online advertising feeling the same pressure as everything else in the economy, new sources of revenue must be found. Internationally-oriented social network hi5 is turning to virtual gifts, which can be bought with virtual coins that members buy with real money. Members can buy virtual gifts for about a dollar each and send them through hi5 to their friends (both real and virtual).

True to its international reach, hi5 is taking a multi-culti approach to virtual gifts. They include a Mexican Rosca cake, a dreidel, and a steamed pork bun. Don’t ask me what culture values rocks or finds cats in cups to be tasty (see below). Each virtual gift costs 80 coins, or about $1.

Hi5 is claiming to be the “first major social network to launch its own virtual currency.” But Facebook has been selling virtual gifts for a long time, even though CEO Mark Zuckerberg won’t talk about how much they are bringing in. Each virtual gift on Facebook also costs $1, and you buy them with 100 gift credits. Facebook’s gift credits are no different than hi5 coins, other than they are not as shiny. They perform the exact same function.

In the future, however, hi5 members will be able to buy other “premium goods and services” with their coins.

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The layoffs keep rolling in. The latest startup to cut back is Hi5, the third largest social network. But you wouldn’t know it from reading the company’s blog, which touts some positive press coverage today:

During a down economy, things are looking up for hi5. Today hi5 was featured in Fortune.com, soon to arrive on news stands.

Yet on Monday, the 110-person company laid off 10 to 15 percent of its employees in what it is calling a “restructuring” move. A tipster told us that the cuts came mostly in Design, HR, and QA. I called to ask for a comment and Hi5’s VP of marketing Mike Trigg confirms:

We did a restructuring this week. We did let a few people go, but we are also hiring people.

The world changed for everybody dramatically last week. We are focused on growing our business. We have great momentum.

Trigg says Hi5 should not be lumped in with other startups that are cutting back right now in order to lower their burn rate and survive longer. With openings that the company is still trying to fill, he says the net effect on headcount will be close to neutral.

Hi5’s growth actually has flattened to around 56 million unique visitors worldwide, according to comScore (August figures). But it is still the third largest social network after Facebook and MySpace.

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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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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.

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EMI is a particularly litigious company. In the recent past, they’vd sued or threatened to sue AllofMP3, YouTube, Apple, MP3Tunes, XM Radio, Infospace (can’t really blame them there) and even The Beatles.

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.

EMI Music v. VideoEgg, Hi5 and others – Get more Legal Forms

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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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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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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.

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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.

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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%.

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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.

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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.

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MySpace and Six Apart will announce that they are joining Google’s OpenSocial initiative. Silicon Alley Insider reported the MySpace rumor earlier today. We’ve confirmed that from an independent source, as well as the fact that Six Apart is joining. Per the update below, Google has also confirmed Bebo is joining.

Google will be making an announcement today. MySpace and Six Apart join Orkut, Salesforce, LinkedIn, Ning, Hi5, Plaxo, Friendster, Viadeo and Oracle as announced Google partners. No word on whether MySpace will continue with efforts to complete its own recently announced platform, but the answer is probably yes. They are likely to simply do both (Update: see below).

Suddenly, within just the last couple of days, the entire social networking world has announced that they are ganging up to take on Facebook, and Google is their Quarterback in the big game.

Update (12:30 PST): On a press call with Google now. This was embargoed for 5:30 pm PST but they’ve moved the time up to 12:30 PST (now). Press release will go out later this evening. My notes:

On the call, Google CEO Eric Schmidt said “we’ve been working with MySpace for more than a year in secret on this” (likely corresponding to their advertising deal announced a year ago).

MySpace says their new platform efforts will be entirely focused on OpenSocial.

The press release names Engage.com, Friendster, hi5, Hyves, imeem, LinkedIn, Ning, Oracle, orkut, Plaxo, Salesforce.com, Six Apart, Tianji, Viadeo, and XING as current OpenSocial partners.

We’re seeing a Flixster application on MySpace now through the OpenSocial APIs. Flixster says it took them less than a day to create this. I’ll add screen shots below.

Here’s the big question – Will Facebook now be forced to join OpenSocial? Google says they are talking to “everyone.” This is a major strategic decision for Facebook, and they may have little choice but to join this coalition.

Bebo has also joined OpenSocial.

Flixster/MySpace screen shots:

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