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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Piczo, a social network with a strong teenage following, has launched a new developer platform that allows users to quickly generate content from partner sites while helping brands increase their exposure on the network. Piczo has never reached near the popularity of mega-networks like MySpace and Facebook, but it continues to draw a sizable audience, primarily from the teenage demographic. In conjunction with the platform, the site is also launching “Piczo Powered Pages”, which effectively integrate the social network’s features into other sites. Users can try one out at eSPIN, a social network owned by Hearst Magazines that has already made use of Piczo’s featureset.

Included in the API are three new features: “Post to Piczo”, “Create a Page”, and “Piczo Toolbar”. The “Post to Piczo” function allows users to post items to their Piczo accounts from external partner sites, which include Meebo, Widgetbox, and Clearspring. “Create a Page” allows users to use pre-designed templates to generate new Piczo pages containing partner content. Finally, developers will now be able to partner with Piczo to become part of the page editor’s toolbar, which the site says allows them to become an “integral part of the Piczo product.”

Unfortunately, this new platform doesn’t share much in common with the dev platforms seen on Facebook and MySpace. Instead, it’s more like a handicapped API that doesn’t have much flexibility. The site may well expand this functionality over time, but for now, don’t expect to see a developer community spring up around Piczo.

That said, the new features should help make Piczo more competitive with the larger, more popular social networks like Hi5, Facebook, and MySpace. ComScore data shows the site slipping off over the last year, dropping from 12.9 million users in April 2007 to 8.4 million globally in June 2008. However, the site has seen impressive growth in the United States, growing from 655 thousand to 1.4 million in the same time span.

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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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Now, the servers of our partners can say, “I want to create a room.” It automates the creation process on a server-to-server basis. Also, we will be putting advertising into these rooms.

In addition to the APIs, the company is also announcing the Meebo Network, which will serve ads inside Meebo Rooms across the Web, splitting the revenues with the Websites hosting the rooms. Since each Meebo Room is formed around a particular interest, ads can be targeted. And to the extent that sites participating in the network have demographic data on their members, that can be used for ad targeting as well. Only Meebo Rooms created through the API will show ads, not the ones created manually.

The launch partners joining the Meebo Network are Piczo, Revision3, RockYou, Social Project, and Tagged. Revision3, for instance, will create a Meebo room on its site where fans can watch a synchronized loop of Web TV shows while chatting. Access to the full APIs and the ad network is by invitation only at this point. Social networks could use the new APIs to automatically add chat rooms to every group page. Rock bands or movie sites could add Meebo Rooms to their sites for visiting fans.

Comparisons can be made here to Userplane, a white-label chat service which was bought by AOL in 2006 and powers many of the chat rooms on MySpace. But there are subtle differences. Most notable is the fact that Meebo Rooms can spread anywhere on the Web. Anyone can grab the embed code and put it on their blog or MySpace page as I’ve done below. Notes Sternberg:

A user cannot take a room off of MySpace and throw it somewhere else. We have all our rooms networked. A user can take the CBS Jericho room, and throw it on their Wordpress blog. Our chat rooms are networked versus islands within Websites.

It is very hard to get a synchronous conversation going. You won’ get enough people on your MySpace page to have a conversation. But with Meebo Rooms, most of the traffic is coming from somewhere else. It solves the problem of the Web being so distributed.

The power of Meebo Rooms is that they let anyone create live conversations on their site by aggregating people with similar interests from other sites. In fact, it links people between sites. And that, hopes Sternberg, will give it enough scale to become an ad network of sorts. Meebo has raised $12.5 million from Sequoia Capital and Draper Fisher Jurvetson.

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When an exec leaves a startup it isn’t necessarily news. But in the last couple of months we’ve seen two execs leave high profile second tier social networks – one from Piczo, and now one from Bebo.

First to go was Jeanine LeFlore, Piczo’s VP of Products and Marketing. Both LeFlore and Piczo CEO Jeremy Verba tell me she left on good terms. She is now running her own startup, called LiveHit, which is months away from launching.

This weekend we received a press release that Bebo’s co-founder and VP Business Development, Jim Scheinman, has left the company to become an entrepreneur in residence at Charles River Ventures. Scheinman was also one of the first employees at Friendster back in the day.

Everyone mentioned above is a friend of mine, and yet I have a feeling I’ll never hear the whole story behind either departure. What I suspect, though, is that there may be a fear that the social networking space is heading for a shakeout. The big guys, which are roughly defined as MySpace, Facebook and (now) Orkut can manage their own destiny. The smaller players may see less riches ahead, and some execs may be looking for greener pastures elsewhere.

Here’s worldwide Comscore for each (unique visitors):

Photo Credit: Silicon Republic and Auren Hoffman.

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What is it? Product Evangelist Keith Crowell says its a way for users to decorate their profile pages in much the same way as teenagers decorate their rooms – with posters, music, etc. Users take (or create) images, videos, style sheets or just about anything else and then add it to their profile. Each content item also includes descriptive data and tags. When someone creates something (say an image showing a band or artist name), any other user can add it to their profile as well. All of the “stuff” created in the Piczo Zone will then spread virally as the more popular items gets added by more and more users.

Users like this stuff – they can see what the popular kids (however defined) put on their profiles and then add the same things to their own. For now users can’t add stuff that they see directly from their friends’ profiles, but software engineer Devon Boyle says they’ll add that functionality shortly.

Users Love This Stuff. But So Do Advertisers

But there’s another reason this is important: user profiling for advertising. As users add artists/bands, popular movies and well known brands (nike, whatever) to their profiles they build an extremely detailed demographic and psychographic profile of themselves that can be used for far more targeted advertising. As an example, a music label could focus advertising around a new album release to users who’s added certain similar bands and artists to their profile. It’s highly likely that the advertising will be aimed at people who are likely to buy, and ad rates increase dramatically.

The content can also be used to predict new trends far before traditional methods. Users will create their own images for a popular local indie band, for example. As more and more users add the image, someone with access to aggregate data will be able to see what’s going to become mainstream well before it actually does. Since Piczo’s users, mostly teenagers, are the trendsetters, it’s a particularly powerful tool.

Piczo isn’t the first social network to experiment with something like this. In July we wrote about a similar product called HotLists released by HotOrNot. HotLists are made up only of images, but like Piczo users create them themselves and they spread virally as users add them from the profiles of people they view. Users immediately took to the idea, adding brands, movies, artists and other things that they identified with to build out their profile. And HotNorNot now has much deeper user information to aim advertisement at. Everyone wins.

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Piczo is one of the larger social networks, with 10 million unique visitors generating 2 billion or so page views per month. Their niche is younger teens – 75% of Piczo’s members are between 13-16 years old. And Piczo focuses on security and privacy. Site visitors cannot search or browse user profiles (they must know the exact URL of the member profile), and and there are numerous ways for users, parents and others to report inappropriate behavior. Piczo has full time staff reviewing all complaints and takes swift action to protect its members. The company’s largest single market is the UK, which accounts for 40% of their users and 50% of page views.

We compared Piczo to MySpace, Facebook, Bebo, Tagged, Friendster and others back in September. See here for other Piczo coverage.

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The UK continues to be Piczo’s biggest market, accounting for 40% of users and 50% of page views (see TechCrunch UK coverage of the company here).

Today at 5 am PST they will announce a number of distribution and other partnerships with major Internet companies, including YouTube, Flock, Photobucket and VideoEgg.

The most interesting partnership is the deal with Flock. Piczo will distribute a Piczo-branded version of the Flock browser (see a similar deal Flock announced in July with PhotoBucket). Flock and Piczo will split search revenue generated from the browser, and users will have easy access to Piczo content. From the press release:

When users download the Flock Piczo Edition browser, they will receive alerts when friends update their sites, providing an instant connection to their Piczo friends. Users will also be able to quickly and easily drag and drop content such as photos and videos into their Piczo Web page. Other features in the Flock Piczo Edition browser include access to bulk upload tools, uninterrupted login and web searching capabilities.

This is good news for Flock as well. They now have access to Piczo’s 10.5 million monthly unique visitors.

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Piczo is adding 35,000 new member registrations per day, 75% of which are teenagers between 13 and 16 years old. Ten million unique visitors come to Piczo sites monthly, adding up to 2.5 billion page views. While this isn’t much compared to monster competitor MySpace (which serves over 1 billion pages per day), it shows what the power of the network effect can do when applied properly – Piczo hasn’t spent a dime on marketing.

And unlike Myspace, Piczo is focused on safety first. It is virtually impossible to browse user pages on Piczo. There is no search or browse feature. Users must share their page URL with others for it to be found, and there are numerous ways for users, parents and others to report inappropriate behavior. Piczo has full time staff reviewing all complaints and takes swift action to protect its members.

Piczo was founded in early 2004 as a paid service. Based on early user feedback it was relaunched as a free service, and founder Jim Conning sent out 100 emails to Canadian teenagers announcing the new site. That is where Piczo’s marketing efforts began and, until now, ended. The result of those 100 emails has been a massive viral spread of the product.

Piczo brought in a high powered CEO late last year, Jeremy Verba. Verba was previously GM and Vice President of AOL’s Voice Services division, which he grew to over a million subscribers. In addition, he was co-founder and president of E!Online, a joint venture of CNET and E!Entertainment Television, now a part of Comcast. Piczo is well funded after pocketing a total of US$7 million over two rounds of financing from Sierra Ventures and Catamount in 2005 and 2006.

The Social Networking Space

I thought this was a good opportunity to look up Comscore numbers on the largest social networking players and see how things are evolving (these are U.S. numbers only). MySpace is still the king, with over a billion page views per day, 100 million registered users and 56 million unique visitors per month. If anything, their lead is growing over competitors.

But that doesn’t mean there won’t be other winners in this space, too. Facebook continues to dominate the college and high school markets, and their recent decision to open themselves up to anyone will almost certainly increase their userbase and page views. Bebo, Tagged, Piczo, Friendster, Tagworld and Tribe all also show very nice growth rates, with little or no marketing spends.

There’s still room to grow internationally as well. Bebo and Piczo both have a strong presence in the UK in particular. Of course, the argument that these companies will be successful in non-English speaking countries v. local competitors isn’t nearly as certain. We expect consolidation to occur in the next 12 months, and the largest independents (Facebook, Bebo, etc.) to be acquired by the big guys (Yahoo, Microsoft and Viacom in particular seem to be actively looking).

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