Social networking industry – February 2008

Social networking sites, in which users create personal web pages or “profiles” and interact with friends, have been one of the biggest successes of Web 2.0. In only two years Facebook has grown from a Harvard University dormitory experiment to a major success story of Silicon Valley. In the past six months, Facebook has doubled its user base. Rupert Murdoch’s News Corporation MySpace was the original social networking site. It is in excellent financial health with more advertising revenue than Facebook. Bebo is the world’s third most popular social network; for customers aged 15-24, Bebo is number one. A business-orientated network based in California, LinkedIn has over 17m users, while aSmallWorld is a digital gated community. The Money Gaming Corporation has designed Doof as a social network built around casual gamers.

UK web surfers lead the social networking revolution with adults logging on to sites far more than their European neighbours. MySpace and Attorneys General have released a Joint Statement on Key Principles of Social Networking Sites Safety. In the month since rule changes at Facebook allowed universities to set up their own pages, close to 400 around the world have done so. In a poll conducted by Computer Which? magazine, Bebo was named the safest and most user-friendly social networking site. According to online market research firm eMarketer Inc, worldwide advertising spending at social network sites increased to $1.2bn by the end of 2007 from $480m a year earlier. Google has said that it plans to enter into the sector by uniting the fractious world of social networking web sites with one standardised set of programming code.
General comments

Social networking sites, in which users create personal web pages or “profiles” and interact with friends, have been one of the biggest successes of Web 2.0. The social networking phenomenon is here to stay. In five years, half of all American internet users will visit a social networking site on a monthly basis, with more than 80% of teenagers following suit. According to one source, advertising dollars spent on social networks are expected to reach $1.6bn in 2008 and $2.7bn in 2011 (see also below), with newspapers and television being the biggest losers. Both MySpace and Facebook allow users to set up a profile, to upload content such as photos, videos and music to their page, and to share this content with other users.
Facebook

In only two years Facebook has grown from a Harvard University dormitory experiment to a major success story of Silicon Valley. In the past six months, Facebook has doubled its user base to end 2007 with 58m active users. Some 2m new people join each week; at the present rate of growth Facebook will have more than 200m active users by January 2009. Last year also saw Microsoft buy a 1.2% stake for $479m, giving the business a notional value of $15bn. In September 2006 Yahoo! attempted to purchase the whole business for $1bn. However, the year was not without its problems. In December, 50,000 signed a petition against Facebook’s Beacon marketing system, which gives advertisers access to the rich personal data on the site, causing the company to backtrack on important aspects of the scheme.
MySpace

Rupert Murdoch’s News Corporation MySpace was the original social networking site. MySpace is in excellent financial health with far more advertising revenue than Facebook, an estimated $850m to $305m. In October it announced that it was moving to Silicon Valley to attract 200 new engineers. A re-design is also widely rumoured. In December MySpace announced a deal with casual gaming company Oberon Media that will see hundreds of games on the network in the next few months. This will be a particular threat to Doof (see below).
Bebo

With around 40m members, Bebo is the world’s third most popular social network behind Rupert Murdoch’s MySpace. For customers aged 15-24, Bebo is number one, pulling 4.3m unique users in November compared to 3.3m for Facebook and 3m for MySpace. Although panel-based web stats do not record users under 15 years of age, Bebo is also thought to be ahead with users under that age. This has helped the company win lucrative deals with confectionary firms, including Mars which paid a six-figure sum to advertise Skittles on the site. Advertisers want to know how long a website can keep a customer hooked – known as “stickiness”. Bebo users spend an average of 33 minutes a day on its site compared to 28 minutes for Facebook and 23 minutes for MySpace. Bebo has launched Open Media, a platform that allows third-party professional media companies to distribute their content on their site.
LinkedIn

A business-orientated network based in California, LinkedIn has over 17m users, up from 8m in February, and is registering new customers at a rate of 1m a month. It has been profitable since 2006, and internal revenue targets for 2008 are $75m-100m. It is used across 150 industries in over 400 economic areas and boasts at least one executive member from every Fortune 500 company. LinkedIn is intended to be useful rather than amusing. Like the others, it hopes to make its product more successful by opening its platform to external developers. In December, it joined Google’s Open Social programme to add new “modules”, similar to Facebook applications, which will provide extra functionality and encourage daily usage. LinkedIn’s biggest advantage is the relative maturity (41 years of age) of its clients. It has built a profitable and successful site without the help of the Facebook generation.
aSmall World

Launched in 2004 by a Swedish banker for celebrities and the wealthy, aSmallWorld is a digital gated community. The identities of the 300,000 users are kept private and are a closely guarded secret. Advertisers who pay $20,000 to $50,000 per month covet the hand-picked community – people can join by invitation only.
Doof

Parent company, The Money Gaming Corporation, has designed Doof as a social network built around casual gamers. It is looking to cash in on the growing appetite for simple, easily learnt games that are typically found on the hand-held Nintendo DS.
News features

UK web surfers lead the social networking revolution with adults logging on to sites far more than their European neighbours. According to telecoms regulator Ofcom, Britons are beaten only by Canadians in their desire for online interaction. Figures suggest that computer users in the UK visit social networking sites for an average of more than five hours a month.

MySpace and Attorneys General have released a Joint Statement on Key Principles of Social Networking Sites Safety in the Multi-State Working Group on Social Networking, which represents 49 states and the District of Columbia. The statement is intended to improve the safety of teenagers online, is designed for industry-wide adoption and relates to online safety tools, technology, and education and law enforcement cooperation.

Social networking sites are getting into co-production. Recently revived Hammer Films is using MySpace to co-produce and premiere new “webisodes” that update the studio’s legendary themes for a modern audience.

In the month since rule changes at Facebook allowed universities to set up their own pages, close to 400 around the world have done so. Companies have also begun to tap the market. In the US, Embark Corp. now lets students apply to more than 600 universities through a centralised system on Facebook.

In a poll conducted by Computer Which? magazine, Bebo was named the safest and most user-friendly social networking site, edging out rivals MySpace and Facebook. The survey praised Bebo for safety and security and for allowing users to easily restrict information and unwanted visitors.

According to online market research firm eMarketer Inc, worldwide advertising spending at social network sites increased to $1.2bn by the end of 2007 from $480m a year earlier. By 2011, the figure is expected to grow to $4bn. No other website has taken advantage of the online advertising cash windfall more than MySpace; revenue exceeded $500m in the 2007 fiscal year.

The surest sign that social networking has become the web’s next big profit centre was Google’s announcement in November that it plans to enter into the sector by uniting the fractious world of social networking web sites with one standardised set of programming code. The “OpenSocial” application platform exists in a pre-beta format with selected developers and is expected to be released shortly. One of Google’s engineering directors says: “We want to help build the fundamental social infrastructure for the web.”