Geert Lovink on Sun, 23 Apr 2006 22:47:05 +0200 (CEST)

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<nettime> the work in social networking

(What I find interesting in the current Web 2.0 craze around social 
networking is not so much the repeat of dotcommania with young IT 
enterpreneurs doing their VC dance but the wider implications in 
society of the massive, unreflected use, and it's later implications, 
once the youngsters are going for a job. Kids have already been warned 
not to mention drugs use or naughtly porn stuff. The article below 
point at another aspect: the seize and quality of the network you 
built. /geert)

Social Networking's Gold Rush

(BusinessWeek Online Via Thomson Dialog NewsEdge)

Just a few months ago, many experts and investors were inclined to 
dismiss social networking sites as a mere fad. Regardless of how many 
members sites such as MySpace (NWS) and Facebook racked up, critics 
warned that supposedly fickle young Internet users were likely to rush 
away as soon as the next hot startup came along. And some advertisers 
were skeptical about the effectiveness of the medium, which features 
user-created content of a sometimes questionable nature.

  Those fears could still turn out to be valid. The sky hasn't fallen 
yet, though. So with each passing month, investors, big media 
companies, and advertisers are being forced to seriously consider 
whether social networking sites can have a viable long-term business 
model. Whether or not there's a future for social networking, players 
that are high on the sector's prospects, or simply don't want to miss 
out on its potential, are pouring in serious money [see BW, 4/10/06, 
"Socializing for Dollars"].


  These days, new deals are made almost daily. Facebook, a site for 
college and high-school students, plans to announce Apr. 19 that it has 
raised $25 million in its latest round of funding from venture-capital 
firms. That same day, Rupert Murdoch's News Corp. (NWS), is expected to 
announce that it is taking a minority stake in SimplyHired, a 
job-hunting site with a strong social-networking component.[Murdoch 
jumped into the sector last year with the acquisition of MySpace, the 
leading social-networking site with a large number of teenage and young 
adult users.] Meanwhile, on Apr. 17, social-networking site Visible 
Path said it raised $17 million in venture capital [see BW Online, 
04/18/06, "MySpace For the Office"].

  Social-networking executives say the deals show that investors have 
increasing confidence in their business plans. "We think we have 
something really special here, and I think this investment confirms 
that belief," says Melanie Deitch, director of strategy for Facebook, 
which is based in Palo Alto, Calif. The company was started just two 
years ago by three Harvard students, who were sophomores at the time. 
It now has 7 million registered users, up from 1 million at the 
beginning of 2005. It ranks as the seventh-busiest site on the Web.

  The company plans to use the $25 million in additional funds to add 
more features to its site. Deitch wouldn't disclose what the Facebook's 
management team has in mind, although she did note that just last week 
it launched a new feature that allows members to access the site from 
mobile phones. The investors include marquee venture-capital investors 
Greylock, Meritech Capital, Accel, and Peter Thiel. Accel and Thiel 
have invested in earlier rounds.

  Facebook also offered no hint of how investors valued it. Just a few 
weeks ago, a media executive told BusinessWeek that the owners wanted 
up to $2 billion in an acquisition; the company didn't disclose how 
large a stake it had sold for $25 million. And Deitch said the company 
hadn't hired bankers or looked to sell itself. She did confirm that it 
had turned down multiple offers from companies that wanted to buy 
Facebook, though. "Our focus is to build the business for the long 
term," she said.

  Facebook already has attracted major advertisers such as Jeep (DCX) 
and Microsoft (MSFT). They can purchase traditional display ads or 
sponsor affinity groups. Local advertisers such as sororities also can 
purchase "flyers" to promote local events. "We think Facebook has a 
unique opportunity to reach a crucial demographic at a key point in 
their lives. And when a site has this much scale and brand recognition, 
advertisers will come," said David Sze, a general partner at Greylock.


  The SimplyHired deal shows how social networking is being used as a 
lever for other kinds of Web sites. News Corp. is going in on a $13.5 
million investment with Silicon Valley venture firm Foundation Capital. 
The deal marks the second round of venture money for SimplyHired, which 
is competing with established job services like (MNST), 
CareerBuilder and Yahoo!'s (YHOO) Hotjobs.

  However, instead of selling advertising directly to firms looking for 
workers, SimplyHired searches the Internet for job listings at every 
place from competing job boards like Monster to the help-wanted section 
of hiring firms' own Web sites and aggregates them on its site. It gets 
its revenue from selling paid-search ads, both through Google and other 
ad networks and through its own sales force. Plus, SimplyHired gets 
referral fees for finding qualified candidates, including payments from 
larger job boards that need to deliver value to employers who pay them 

  "We can deliver job seekers for destinations that have employer 
relationships, so in that sense it's complementary," CEO Gautam 
Godhwani says. News Corp put in $3.5 million, while Foundation Capital 
put in $10 million. Godhwani says there are active talks to make 
SimplyHired the beginning of a classified strategy for MySpace.


  Simply Hired's edge among other jobs sites is clever in its use of 
social networking, says Greg Sterling, founding principal of Sterling 
Market Intelligence, a consulting and research firm in Oakland Calif. 
Through a deal with LinkedIn, users can press a button marked "WhoDo I 
Know?" that is placed with each job listing. LinkedIn searches the 
user's network to tell them who they know at the hiring company, or who 
they know who knows someone at the hiring company.

  Says Sterling: "That's really the value-added they deliver that sets 
them apart." Investors hope it's enough value-added to deliver a big 
return on their optimism.

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