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Rising demand for social networks

Financial trends and news by Bambi Francisco Roizen
August 14, 2007
Short URL: http://vator.tv/n/38

This week, KickApps - a private-label social network service - announced that it received $11 million in venture funding. (Check out KickApps Vator pitch) This follows recent news that Ning, which offers a similar service to smaller publishers, landed $44 million in venture financing.  Clearly there is a big appetite for social networks from those doling out the cash to publishers who want to layer on such networks to keep their audience engaged and productively creating cheap content. The stats speak for themselves. Social networks create the highest pageviews per visitor. For instance, as of July 2006, the average MySpace visitor viewed 507 pages while Facebook visitors viewed 272, according to Nielsen//NetRatings. Compare that to 37 pages viewed per visitor on the hottest video-sharing site YouTube. I'm sure these numbers have changed since, but you get the point. According to Bear Stearns, 51% of 13-24 year olds spend time on user-generated sites, which are essentially, for all intents and purposes, social networks. These emerging social network companies are playing to the cultural shift in what the audience is consuming -- their own lives, as they are recorded, displayed, and shared like a daily soap opera. The question is whether the private-label providers can become larger networks than destination social networks. I don't think so. This is mostly because the private-label networks are too disparate and disjointed to create any meaningful network effects. In a way, one can look at these private-label social networks as the TheGlobe, Xoom and GeoCities of the Web 1.0 world. These services were not the portals. They became, in the case of GeoCities (which was bought by Yahoo), a subset of the portals. It's probably the case that these providers will become subsidiaries of portals and media companies as well. The M&A activity is already happening.