Friendster gets $10 million
 

DAG Ventures, Kleiner Perkins and Benchmark Capital have injected another $10 million into Friendster, the first of the social networking systems, after washing out previous value in a $3 million recapitalization earlier this year. I can't imagine to what end.

Places you go to join communities are a dying breed, if you ask me. The fluid populations of online communities, which flowed from Friendster to newer models of community, such as Facebook and MySpace, then Relationships are constantly on the move, fragmenting and, most importantly, demanding new investment.on to sites like YouTube, are forever in motion, so what is it an investor is trying to capture? People? If so, then you have to recognize that people move on and the churn rate for a community site, where Friendster has turned over its entire membership at least twice if not five times since 2002, makes any investment in registered users as an asset you can sell?to advertisers or an acquiring company wanting the relationships?an exercise in depreciation. Sooner rather than later you have to write off the investment in acquiring those customers.

Let's imagine what $10 million buys today. Well, if it takes $10 to attract a customer, then you've purchased one million customer relationships, at first. After six months, churn brings the number of customers down to, say, 600,000. Of course, it may take much less to attract a customer, but the question is, if winning customers costs nothing and you don't earn any money from them upfront, just how valuable will they be to advertisers?

The dream is the demographic Nirvana, where communities collect so much data about the individual that every advertisement becomes a pre-qualified contextually relevant experience and conversion rates soar. But, so far, no one has seen that actually happen. Ad rates at MySpace and YouTube are abysmally low. In 2005, MySpace, which had more page views than Google, earned only about $30 million in revenue compared to Google's $6 billion.

The problem with the Nirvana scenario is that no community is a complete picture of the user. Community sites represent demographic slices, which is why the adjective "niche" has been applied to community when venture capitalists talk about success these days. So, one is constantly paying for a fragment of that demographic promised land at full Nirvana value. It's a losing business, because the asset?user relationships?are constantly on the move, fragmenting and, most importantly, demanding new investment.

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:thumbsup

........ :hitit

Friendster has been a dying breed since MySpace came out. Even though they're playing catchup now, they've lost the battle in my opinion.
WG

I did not know that they were even still around.

If they want to catch up, they need to be in the news

agreed... when your success relies soley on the fact that you are "the cool thing" at the moment... then its over the moment you aren't. usually, its over forever.

agreed, let's see is they can re-invent themself's :Oh crap

Great article, thanks for sharing. Based on his hypothesis about Friendster, and the actual dollar amount that MySpace is pulling in, it makes me wonder how long MySpace will be community site king - and if it even pays to be king for this style of site.

hot damn. :thumbsup

It pays to be king if you're not so stupid to lose money on all that traffic. :1orglaugh

let's not forget friendster owns the social networking patent. Besides, friendster is still huge in foreign countries and should be able to monetize that traffic just fine.

Friendster has mostly FOREIGN traffic. Hard to capitalize. Try advertising there (paid or if you know what's up, for free) and you'll see what I mean. There ARE some mainstream products that do well there but they are not very obvious.

that assumes that people in countries where friendster is "huge" are just too dumb to figure out that clones might do well and will never compete.

So Plentyoffish.com is a dying breed?

Interesting article thanks for the post :)

DH

100 million registered users on myspace, and growing....but is it worth 588 million? no idea!

If he's right, we're seeing very strange thing happening. Sites with tons of traffic not having any profit potential? So long as there is traffic, and specifically in the amounts these sites see on a daily basis, money is to be made. Is this an indication that community site simply can't survive over long periods of time in their current format?

I'd say this is proof these sites can work. They just have to change up the format, like not having videos in profiles etc.

you do realize that this was 100% scam right? he was just an asshole that ran around making wild claims about how successful his site was and was never proven to make a dime.

i meant by that, that he was busted time and time again for making false, impossible claims, hiring people to post all over the web about what a genius he is and for creating a buzz about the site. its kinda cool that he made a pile of crap famous, but the claims about that site being the biggest adsense site in canada, having xmillion hits per day, making 10K a day with adsense etc are bullshit.

myspace is going to go bust in less than 3 years imho

it wont go bust when it is owned by news corp imho

I hope your not talking about Shoemoney's "arguments" to prove so :winkwink:

I think he's talking about Plenty of Fish.
WG

I still dont understud why myspace is so popular and friendster not.

I think it was because Friendster put a lot of limits on accounts that MySpace didn't.

friendster are dying

myspace is the king daddy now

develop another online hot spot, as long as they capitalize on the traffic... and change with the times ;-)

I would have to agree with this... :)

I don't know what their loadtimes were like in LA, but up here they were always bad. The peak loadtime issues myspace has now makes friendsters average loadtime seem like molasses in January.

:2 cents:

They are in trouble now that http://www.petspaces.com is launched...:pimp

They are in trouble now that http://www.petspaces.com is launched...:pimp

how do you know if he's lying?

hehe :1orglaugh :1orglaugh

It's easy to find detailed differences, but none seem likely to account for the performance gap. I suspect that has a lot more to do with the phenomenon which makes a New York restaurant the place to be seen this month and passé a few months later. And it must be a factor that social networks need a critical mass before they are appealing to their users.

But really, a few here don't seem aware that social networking has probably had more people chasing a popular solution/presentation and for longer than just about anything except maybe micropayments, the other "Holy Grail" of the 'net. I even had a failed shot at it about 7 years ago :)

The interactivity and potential reach of social networking is such an obvious match for the internet, it's hardly surprising that people are willing to pump money into it. And although MySpace is top of the heap now, it is clunky enough to still be vulnerable.

they shoulda taken the 50 million before myspace came out

friendster is more active outside US

thanks for the articles

you must of missed the deal announced about a month or so ago....

google and myspace partner up on a venture worth 900 million in revenue to myspace over the next 2 yrs.

Now that is a chunk of change , damn.