The Social Networking Implosion

Lots of social networking stuff happening in the last few days. First Christos Cotsakos, former CEO of E*Trade, has raised $29.6 million for Moli, a new social network, after having put in something like $20 million himself. The company is already at over 50 people plus more offshore. GigaOm has a good review online, with the biggest special thing of Moli being the option to have several profiles folded into one, meaning you have one for work and one for family, with different information shared within them. At the same time, Techcrunch posts that Lookery is offereing advertising runs on Facebook Apps for $0.125 CPM, which is awfully low. Then chatty Mark Zuckerberg talks about numbers at a company  event, which leak: 2007 saw $150 million in revenue, 2008 will see $300-$350 of revenue with $50 million EBITDA but $200 million of CapEx (read buying servers and the like), so a loss of $50 million. If we take EBITDA like Earnings (just to make it easier because they will never buy stuff again … yeah right … never mind … let’s go on) then the $15 billion valuation would add up to a P/E ratio of 300! Forward P/E that is. Now that’s a valuation to look for!
The problem is that in the Google Earnings Conference Call, it just came out that monetization of social networks is really hard, advertising wise. Xing is in a very good spot here because they are monetizing via their users. Within our own platform, the social network is just a side effect that gets used. Pure play social networks will either have to become really really huge, or will most likely face a problem. At $12 cents cpm, even thinking a site is fully sold out, and gets 2 ads per page, that would result in $240 for a million site impressions, meaning $2.4 million of yearly revenues for a site like StudiVZ+SchuelerVZ. That is really nice, no questions asked, and a lot of nice things can come of it. The problem again might be that there is a social contract between the networks and it’s users so any new push to monetization in a new way might lead to a revolt of the users.
Facebook is surely on a good way, but it will be interesting to see their next investment round, in light of possibly further bad news, or an IPO to see what they are really worth. Microsoft couldn’t care less because the investment was more of an ad buy, but for the other investors, I don’t know.

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One thought on “The Social Networking Implosion

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