Today German newspaper Hamburger Abendblatt published an interview [GER] with Xing CEO Stefan Groß-Selbeck (who recently replaced founder Lars Hinrichs), and he revealed a couple of interesting tidbits of information about the future direction of his company (find a horrible, Google-translated version of the full interview in English here).

Talking in broad strokes, Groß-Selbeck said 3.5 million of the 7.5 million Xing members are based out of Germany, Austria and German-speaking Switzerland. This isn’t really that surprising, given the background of the company. But the interview also marks the first time a Xing representative publicly (albeit indirectly) admitted losing in the USA and China.

Groß-Selbeck said he rather sees Xing’s future in those countries where the company has opened offices: Spain, Italy and the rapidly growing web market of Turkey. This statement was followed by him dodging a question about Xing’s previous plans to enter the US and China (he specifically responded that the focus lies on said countries and Xing plans to double its German user base in the next years). In other words, Xing seems to have stopped thinking about expanding into those regions for the time being.

My guess is LinkedIn never really feared the Germans entering their home market anyway, as a) almost no American really knows Xing, b) about half of LinkedIn’s 42 million members live in the US, c) coffers are filled to the rim and d) a $1 billion valuation is sure to let all key employees sleep soundly (Xing’s current market cap at the Frankfurt Stock Exchange: $220 million).

Google Trends shows that LinkedIn outclasses Xing in global traffic, too:

But Xing backing up in the US and China isn’t necessarily good news for LinkedIn. Their strategic decision won’t make it easier for LinkedIn to gain market share in said European countries where Xing already boasts a strong brand name and position. Here, LinkedIn is in for an uphill battle, which may take years to win (especially as Groß-Selbeck also said in the interview he intends to boost the number of employees from 240 to 360). And China has no shortage of business social networks either (Tianji, Wealink [CN] or Alibaba’s Ren Mai Tong to name just a few).

LinkedIn is currently available in four languages (English, Spanish, French and German), with more to come soon. The only office outside the US is located in London. In Europe, LinkedIn is particularly strong in Belgium, Holland, France, Great Britain and Denmark). Traffic in China is negligible for both LinkedIn and Xing.

Quick note:
German is my mother tongue, which means I didn’t have to rely on the Google translation linked to above when writing this posting.

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At the time, I thought it was a bit of a strange move to support Facebook before powering the platform of its new owner, but former socialmedian CEO Jason Goldberg – who now has the position of Chief Product Officer at the public company – told me to expect an integration with XING to follow suite soon enough.

As of today, XING users can install the first two applications on its OpenSocial-driven platform: one (Xing News) takes the entire concept of socialmedian – personalized news filtering and sharing – and transforms it into a straightforward XING feature, the other one (Ask Xing) is a tool users can install to easily ask questions to the XING community and get responses without ever needing to leave the service.

These are arguably rather mundane applications, but the bigger news is that the social network now also features its very own application platform and is about to open it up to third-parties as well. In the near future, 10 current partners will get to distribute their own OpenSocial applications on the platform, and Goldberg tells me ultimately the plan is to open up more and finetune the approval process for new apps.

For reference: XING boasts 7+ million members, mostly in Germany and neighbor countries, of which over half a million actually pay a monthly subscription fee to access some of the premium features.

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Socialmedian is essentially a personalized news filter that integrates well with social networking platforms. It aggregates news articles from around the web, blogosphere and social services like Digg, Delicious, Twitter, Flickr, Facebook, YouTube, Google Reader, FriendFeed, etc. which are then filtered by topic. Users can pre-define which keywords and topics they’d like to receive news on, and they can also submit articles to the site with the help of a bookmarklet. Stories can be viewed either in chronological order or according to popularity on the network.

As of today, the service works both ways as far as the integration with Facebook goes. Once connected to the social network, users can now instantly share news with their Facebook friends, if they have a socialmedian account that is. As far as I can tell, this is the first social news service to use Facebook Connect in this manner, but Digg CEO Jay Adelson has hinted in the past that FB Connect might be the future of Digg, so expect news to come from them about a deep integration soon. Or not, of course (an announcement has been expected for some time but for some reason all remains quiet).

I asked socialmedian founder Jason Goldberg about the Facebook Connect integration, and why they went for it.

Socialmedian has always been about the news filtered by your network. The fact is that for most people around the world, Facebook is THE Network. While there has been some nice early adoption of Facebook Connect amongst blogs and pure content sites, as far as we are aware socialmedian is one of the first social networks to give the social network over to Facebook — let them take care of the profiles, the registration, and the social-graph, and we’ll stick to what we do best: the news filtered by your network.

He also hinted that there will be more initiatives launched from within Xing this Spring that will turn it into more of an open platform rather than an island, which should make it compete more effectively against LinkedIn, which is making its way in the European business social networking scene lately.

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Socialmedian is basically a personalized news filter that integrates well with social networking platforms. It aggregates news articles from around the web, blogosphere and social services like Digg, Delicious, Twitter, Flickr, Facebook, YouTube, Google Reader, FriendFeed, etc. which are then filtered by topic. Users can pre-define which keywords and topics they’d like to receive news on, and they can also submit articles to the site with the help of a bookmarklet. Stories can be viewed either in chronological order or according to popularity on the network. The startup was operating on a mere $560,000 in seed funding from individual investors and The Washington Post Company, so this is definitely a successful exit for them.

About 3 weeks ago, we reported on XING CEO Lars Hinrich, who founded the company in 2003 and led it to an IPO three years later at the Frankfurt Stock Exchange, stepping down. He still got to announce the news, though:

Why do we think that socialmedian is a perfect fit for XING? Here´s why: In business success depends on access to the right information at the right time. Both the speed of information and the sheer volume of data have increased rapidly due to the rise of the internet. Traditional media companies, social media such as blogs, tweets, videos and other user-generated websites now provide daily news, leading to a veritable flood of information. The consequence: Time-strapped professionals are forced to parse through numerous news sources for relevant information and sort, organize, and share stories on their own.

In the short term, this is mostly about adding business news functionality into the network, and hiring experience and knowledge. But with this acquisition, XING also shows that it’s not about to give LinkedIn and Facebook, both of which are expanding rapidly across the globe, an easy path to dominating social networking for professionals. The Applications Platform division that former Jobster CEO Goldberg will be heading is an entirely new business unit and will likely take a page from the application strategy that both LinkedIn and Facebook exhibit. It will basically enable application developers and content providers to connect to the XING platform. Goldberg’s first job will be launching OpenSocial on XING (due this Spring), after which he’ll concentrate on making strategic partnerships with service providers that can bring added value to XING’s member base on a professional level.

Publicly listed XING currently boasts nearly 7 million members (up from 4.8 million in 2007), about 510,000 of which are paying about $90 per year for a premium account to get full networking functionality. XING has been cash-flow positive 3 months after the start and boasted seven record-breaking quarters after the IPO, achieving more revenues and earnings in each quarter. Revenues from January to September this year amounted to $32 million, 28% more than in 2007 as a whole.

We’re left wondering if the acquisition was settled over Twitter. If you don’t know what we’re talking about, read this.

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Hinrichs founded the company in 2003 and led it to an IPO three years later at the Frankfurt Stock Exchange where the market cap is currently hovering at around $182 million. (Which is a fraction of LinkedIn’s reported $1 billion private valuation). He will join Xing’s supervisory board as a consultant.

We asked about the reasons for his withdrawal, mainly bringing up Xing’s recent performance and the increasing encroachment of LinkedIn in Europe (especially in non-German speaking countries). Hinrichs responds:

Xing is performing better than expected and has built up a huge track record with the investor community. I think 40% EBIDTA margin [and] close to three digit growth speaks for itself. I am a serial entrepreneur (Xing is my third company) and and it’s different running a 180+ people company poised for growth and that goes after acquisitions.

Linkedin is rich on members but does not have the opportunities to engage & monetize them as we do. We are well prepared and they don’t get real traction around here. You have to understand Europe to win Europe – that’s what we are doing.

In fact, Xing’s numbers aren’t that bad at all. The site currently has 6.5 million members, about 510,000 of which are paying about $90 per year for a premium account to get full networking functionality. (LinkedIn claims 30 million registered users). XING has been cash flow positive 3 months after the start and boasted seven record-breaking quarters after the IPO, achieving more revenues and earnings in each quarter. Revenues from January to September this year amounted to $32 million, 28% more than in 2007 as a whole.

But apparently, this performance wasn’t enough. Xing isn’t pointing out exact reasons, but one factor might be the sluggish traffic on the site. In comparison to LinkedIn, Xing’s traffic on a worldwide basis has stalled in recent months (see the Google Trends chart above).

The share price might be one other major reason: Xing shares never really took off and now stand at about 25.50 Euros, 4.50 Euros less than the offering price two years ago.

Xing is quite strong in parts of Europe, where the company set up offices in Hamburg, Barcelona and Istanbul, but the site never gained a foothold anywhere else: Being almost unknown in the USA and Asia is a significant drawback as far as business networking in a highly globalized economy is concerned. Xing’s core markets are Germany, Austria and Turkey, while LinkedIn is winning in Great Britain, Belgium, Holland, France and Denmark, for example. Now Xing says one of the main duties of the new CEO is to pursue a more aggressive international expansion strategy and that it has a war chest of $50 million to achieve that goal.

Hinrichs, who is widely regarded as one of the few icons in Germany’s web industry, denied rumors about his withdrawal until Friday last week via his Twitter account. In his personal blog he says he now has more time to develop and implement new business ideas.

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Cember.net is said to be the biggest business networking site in Turkey with over 280,000 members. The site is ranked at 117 in Turkey according to Alexa.

Xing said it would use the acquisition to strength its penetration into Turkey, “one of Europe’s fastest growing economies.” Çağlar Erol and Nihan Colak Erol, the founders of Cember.net, will stay on with Xing to support the Turkish-speaking Xing community with a small team based in Istanbul.

The price of the acquisition was not disclosed.

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We do not know what price Plaxo is looking for. The company has raised $28.3 million to date over four rounds, including $9 million last February. The company had over 15 million users as of September 2006, and their recent integration into Google Open Social has led to a further growth spike.

There were rumors in mid 2007 that Plaxo was being acquired by European competitor Xing. Those rumors were either inaccurate or the deal was never completed.

I have an email in to Plaxo CEO Ben Golub for comment. If I were him, I wouldn’t respond.

Update: User data from John McCrea, VP Marketing at Plaxo:

For our networked address book service, we’re right around 20 million users, plus another 15 million address book accounts hosted through partnerships.

Increasingly, though, we are focused on Pulse as the key driver of active users (and pageviews), and although we are still in beta (and haven’t yet broadly promoted to the address book user base), we’re seeing good month-over-month growth in all the key indicators. With Pulse, we’re at 1 million unique monthly users, up from 250K at the beginning of November. In terms of page views and time spent on the
site, our per-visit numbers appear to be comparable to Facebook (based on data from Compete.com), even though our demographic is much more like LinkedIn’s (professional, 25-50 y/o).

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Visible Path differs from other business social networks like LinkedIn or Xing, by creating your social network out of your email inbox. The service is based on an Outlook plug-in that impressed us earlier because your connections are based on the frequency of your real interactions and not random friending or pokes. These relationships are mapped online and make up a directory of people you can search through by skill or relationship. It’s a useful feature that I imagine a service like the “email utility” Xobni implementing.

Visible Path never saw as great a level of adoption as LinkedIn, which launched around the same time and has effectively cinched the U.S. corporate social networking scene. Maybe their new partner will give them some much needed exposure.

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We are hearing a LOT of chatter about a possible Xing-Plaxo merger in the $250 million range. The deal makes some sense – newly public Xing is headquartered in Germany and hasn’t gotten much traction in the U.S. where it competes directly with LinkedIn. Plaxo, with a very strong U.S. presence, could give them the opportunity they need to attack this market.

But people who would be very likely to have knowledge of the deal are saying they’ve heard absolutely nothing. One thing we are hearing from everyone, though: Plaxo is definitely in play. The company’s fair valuation is another matter. Last year they crossed 10 million members, claimed they were getting 50,000 new members per day, and had just become profitable. But it has been more than a year since Plaxo released those stats.

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Hype vs. Hesitate
Just as this week’s Pew Internet Study stirred a debate on the view of Web 2.0 in the US, Germany has seen similar arguments on the size of the phenomenon locally. For a long time, several indicators had hinted that Germany was falling behind in broadband penetration compared to other European countries like Sweden or Norway. But a recent OECD study painted a very different picture: looking at the total number of households (as opposed to per-capita penetration), Germany comes out on top in Europe with 14.1 million subscribers in December 2006 (followed by the UK at 12.9 and France at 12.7 million). So the crowds are here, but where can they go?

“Web 2.0” is a term that brilliantly translates around the world, but many of the sites that are commonly associated with it have a language barrier for international audiences (take MySpace for example: it officially launched its German version only in March of this year).

While English certainly isn’t foreign to Germans, it has still slowed their adoption – and network effects, which have been a driving force, are often tied to language and reach as well. What’s been the consequence in Deutschland? A mushrooming of German copycats that have localized and copied their US role models, sometimes down to the last pixel.

Copy/Paste Innovation
Whether you’re looking for social bookmarking, photo sharing, video posting or a college social network, Germany’s clever entrepreneurs have done the translation for you and some even fared quite well.

The best example by far is StudiVZ, whose name stands for “student directory.” Launched in October 2005, it now claims to house 2.1 million users. Despite a myriad of security problems and controversies, new users kept coming in, which only speaks to the universally strong demand for such networks among students. In January of this year, Germany had its mini-YouTube moment when StudiVZ sold for €85M ($100M) to the German media conglomerate Holtzbrinck Group.

If the screenshots look familiar, you won’t be surprised to hear that StudiVZ’s early versions of the site were using filenames like fbook.css or poke.php. (Facebook was in talks with StudiVZ but it walked away because of scalability and security concerns about the platform. Instead, Facebook is now working on its own strategy – let the battle begin).

Another success story is Xing (formerly OpenBC), a professional network like LinkedIn. In December 2006, it became the first Web 2.0 company to go public and is now traded at the Frankfurt stock exchange. Xing’s rapid growth among the German business community came rather unexpected after it launched in November 2003, especially in a country that isn’t typically known for its culture of business networking. The site now boasts 2 million members and about 13% of its users pay for a monthly premium subscription of €5.95. With revenues of €10 million in 2006, Xing’s performance at the stock market has been somewhat lackluster and the real test for the company will come as both Xing and LinkedIn expand beyond their original markets (LinkedIn now has 9 million registered users and $10 million in 2006 revenues; it recently raised $13 million more).

The Brighter Side: What’s next
Of course there are creative and innovative startups to be found (and growing any multi-million user base is a feat in itself regardless). For some inspiration, take a look at our previous coverage of Plazes (currently a sponsor) and SellABand; last week also saw the launch of MindMeister, a promising online mind mapping collaboration tool. Other notable services include blauarbeit.de, a growing reverse-auction site for jobs and services, and we have yet to wait for a successful US counterpart.

In short: Germany is buzzed right now and the biggest question for the startup scene is how the many look-alikes will develop over the next year. You’ll often hear that investors are hesitant to invest in ideas that “haven’t been proven in the US yet” but there are several other factors at work here: Germany is generally more risk-averse, the bureaucracy is more cumbersome, and entrepreneurial networks like Silicon Valley aren’t as strongly developed.

Nonetheless, the country’s business angels and media conglomerates (Holtzbrinck Group, Burda, Axel Springer) are eager to invest with rapid-fire pace at the moment but the majority of German internet users have yet to be convinced that there is a land beyond eBay, Google, Wikipedia and some online news sites.

Meanwhile, German and other European startups are in a prime position to tinker with mobile applications and I wouldn’t be surprised to see more innovation in this space soon. The continent is covered with advanced data networks and the UK has already seen the introduction of flat-rate data plans at reasonable prices. Germany’s market is sure to follow and the boon of the mobile web will start in Asia and Europe sooner than in the US. You also want to watch out for innovations around IPTV as subscriptions are expected to reach 2.6 million in Germany alone by 2010.

Until then, let’s see how Facebook and StudiVZ duke it out

Curious fact: Google’s market share for search is near 92% in Germany. And yes, it’s a verb here, too.

Gregor Hochmuth is an analyst and entrepreneur in residence at Hasso Plattner Ventures. He runs zoo-m.com and his own homepage at dotgrex.com.

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