Social Networking Industry Today
Posted July 7th, 2008 by admin
In May 2008, the top five social networking sites were as follows: MySpace, Facebook, Classmates Online, LinkedIn, and Windows Live Spaces. Just a few years ago, multimillion dollar cash deals were the norm in social networking. Classmates Online sold for $100 million in 2004 and Rupert Murdoch bought MySpace’s parent company for $580 million in 2005.
Now that social networking sites have proven themselves with millions of dollars in preliminary annual ad revenues and brisk growth of users, valuations are rapidly escalating. Professional-networking site LinkedIn was recently valuated at $1 billion with a $53 million investment from Bain Capital equity firm, putting the site’s value at about 10 times its expected revenue of $100 million. Microsoft valued Facebook at $15 billion with a $240 million investment this spring – more than 100 times Facebook’s revenue of $150 million. Widget-making site Slide’s latest valuation clocked in at $550 million, benefiting from a $50 million investment from Fidelity and T. Rowe Price.
Demand Media was valued at $1 billion in the past year, 10 times the expected revenue of $100 million. In its most recent round of financing, Demand raised $100 million from firms including Goldman Sachs and Oak Investment Partners. In April, instant messaging service Meebo secured an estimated $25 million, bringing their valuation to $200 million through Montgomery & Co. investment bank, though revenue is estimated at $1 million.
AOL recently paid $850 million for Bebo, a site where users share music, blogs, videos, and other media. Last year, CBS purchased the UK-based music site Last.fm for $280 million. Google, Cisco Systems, and Comcast have all entered the Web 2.0 fray in an attempt to be competitive with the respective purchases of social networking sites Zingku, Five Across, and Pulse.
Advertising Models
Market research firm eMarketer estimates that $1.4 billion will be spent on online marketing in 2008. Advertisers are finding ways to match the market growth with innovative advertising mechanisms. With “MySpace App Sponsorships,” developers can get their applications a featured position in the MySpace application gallery for a weekly fee of $50,000-100,000.
Honing in on specific groups in certain areas of social networking sites (hyper-targeting) is becoming more prevalent, as evidenced by recent MySpace campaigns aimed at distinct groups such as snowboarders or movie fans. Furthermore, asynchronous social games (applications in which users can interact without being online at the same time) are reeling in millions of unique users per day on sites like MySpace, Facebook, and Bebo.
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