On the spam issue: Tagged has always been aggressive about “encouraging” users to add their address book and invite new users. It’s sadly a proven way to get lots of new users, as Plaxo showed to everyone’s dismay earlier this decade by turning invitation spam into an art form. Back in 2007 I noted that Tagged was very aggressive with address book imports: “Tagged is also very aggressive with signing up new users. At registration users are strongly encouraged to invite their entire address book as friends. It’s a highly viral, albeit controversial, way to quickly add lots of new users.”

The fact is though that this is largely standard practice now. Facebook, Microsoft, MySpace, Google, and everyone else encourages users to sign in to their email accounts and invite everyone they know to try out their services.

Tagged definitely went overboard this time, forcing email recipients to open an account just to see pictures. But CEO Greg Tseng told me today they shut it down almost immediately (after a few days) based on user complaints.

They definitely deserve a slap on the wrist. But the picture peHUB paints, wtih fleeing board members distancing themselves from the company:

In the meantime, the company’s investors aren’t saying much, either, and some appear already to have distanced themselves from the startup. Former PayPal CEO Peter Thiel, Scott Banister, who cofounded IronPort Systems, and LinkedIn founder and CEO Reid Hoffman were among other high-profile angels who gave Tagged $1.5 milllion back in 2005. All three were on the board at one point. Hoffman, who hasn’t returned a request for comment, is the only angel who has kept his seat.

They added “What anyone is still doing on the board of this company mystifies me, honestly.”

Here’s the story of Tagged as Tseng sees it: Peter Thiel was never on the Tagged board of directors because of the conflict with his Facebook board seat. Scott Banister left to focus on his startup, Zivity. And Reid Hoffman, as the article noted, remains on the Tagged board.

Tagged has less than 40 employees and has been profitable for more than two years. They’ve raised just $13.5 million in capital and have revenue in the $10 million – $20 million range.

And the site is growing. Comscore says nearly 32 million people visited Tagged in April 2009, up from 14 million a year ago. And they’re not just hitting the site and bailing. Those visitors racked up over 5 billion page views in April 2009, up from less than a billion/month a year ago (chart below).

Clearly, they aren’t dead. Here’s hoping they keep the spam down to reasonable levels in line with competitors. But in the meantime, this small social network isn’t anywhere near the deadpool.

Update: Tseng apologizes for the email spam on the Tagged blog, and links to this document showing exactly how the process worked. Points for transparency.

Tagged_sign-up_process –

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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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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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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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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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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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We do not know who made the investment. This is Tagged’s third round of financing. They previously raised two rounds – $1.5 from angel investors in September 2005, and $7 million from Mayfield three months later.

Like Hi5, Tagged is profitable. Back in May they were adding more new users per day – 350,000 – than MySpace.

With nearly $1 billion in venture capital invested in new web startups from April – June 2007 alone, its clear that silicon valley is rolling in money again. With all the hype around Facebook, second tier (but still huge) social networks are an easy bet to get big money. Let’s all just hope for a soft landing.

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Co-founder and CEO Greg Tseng told me today that the company has reached profitability on $600,000 in monthly revenues, and that user growth has spiked to 350,000 new users per day. That’s well ahead of MySpace, which is currently growing by 250,000 – 300,000 users per day.

Comscore shows Tagged spiking nicely compared to the copetitors (the last time we compared the networks was September 2005). Click the image for a large view.

There are at least a couple of reasons for the growth. In October 2006 Tagged went from an under-18 site, to allowing users of any age to join. Tagged still has tight security in place for users under 18. For example, profiles for 13 and 14 year olds cannot be viewed by the public or registered users over 16, and profiles for 15-16 year olds are private to non users and users over 18. Older users can still add these youngsters as friends, but they must know their email address or last name to request the friendship, and the younger user must also accept them.

Tagged is also very aggressive with signing up new users. At registration users are strongly encouraged to invite their entire address book as friends. It’s a highly viral, albeit controversial, way to quickly add lots of new users.

Lots of these new users are sticking around, too. Tseng says that half of their 40 million users are active and have signed in over the last month. Tagged is now generating 1 billion monthly page views (about half of what MySpace does in a day).

Tagged is getting serious about revenue growth. The $600k/month they currently generate comes mostly from a search deal with Ask.com and low CPM display ads. The Ask.com partnership may be on the rocks, however. Tseng says the deal is “not performing.”

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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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This comes just two weeks after news of competitor Tagged’s $7 million financing by Mayfield was leaked and reported by Matt Marshall.

My previous posts on Tagworld are here.