Jeff Clavier's Software Only

Mo' money to build a bigger Dogster niche

A year ago (give or take 10 days) I wrote about Dogster Inc. – the maker of the highly popular dogster.com and catster.com – turning profitable, an unusual fate among Web 2.0 companies. It was still a very small business, but gave co-founders Ted Rheingold, John Vars and Steven Reading a foundation to grow their company at the pace free cashflows were being generated. Up until then I had considered Dogster as an amusing parody of other social networking sites, and suddenly realized that there might be much more than met the eye.

A few metrics caught my attention: the size of the user base, the consistent growth, a promising ARPU (Average Revenue Per User) and a CPM which was higher than I expected, thanks to an advertising program that was more than pure banner and text ads. These metrics doubled in a few months, allowing the company to scale its operation to 10 salaried employees while increasing its cash balance. The other thing increasing was the list of brand advertisers interested in reaching out to this thriving community of passionate dogs and cats lovers, including the likes of Disney, Target, PetSmart, Clorox/FreshStep, Gap/Old Navy, Warner Brothers, Nintendo and VPI Pet Insurance.

As the company turned in its first six-figure revenue month, it became clear that the small Dogster “niche” was turning into a real business. The economics of that market are indeed significant: 63% of US households have cats or dogs (160M pets total), yearly spending is around $36B, and advertising budgets on pet products are in the billions of USD. It also became clear that the solid organic, and profitable, growth of Dogster could sustain a bit of a booster in the form of an outside financing – which leads to today’s news.

A couple of hours ago, CEO Ted Rheingold announced on the Dogster blog that the company had closed a $1M Series A financing from a roster of angel investors – mixing successful Internet entrepreneurs and experienced investors. As a matter of disclosure, but you already guessed, I am thrilled to be involved in this great syndicate (*). Joining the Dogster board as the representative of Series A investors is Michael Parekh, an active angel investor – and blogger, who in a previous life founded the Internet Research activity of Goldman Sachs. The official press release is here.

Dogster will be using these funds to accelerate the development of new features, hire a number of new employees including a kick-ass Marketing Director, launch a number of new properties in -ster, build new distribution partnerships like the VideoEgg or Userplane one, and more generally have additional means to engage and support our users.

Staying true to the values of the community as it grows 4 to 5–fold over the next 12 months is certainly going to be challenging for the team, but I have total confidence in their ability to bring the company to the next level. Congratulations for the success to date, best of luck for the future.

Now, esteemed reader, give us a hand: think of 5 of your favorites dogs and/or cats, and point their owners to the registration pages of Dogster and Catster.

And yes: Woof!

Oh, I was SO waiting for that headline: “the bubble is back, the new sock puppet got funded”. Greg (Linden), have you noticed the “profitable for 3 quarters”, “positive cashflows”, “making money” mentions ?

(*) Just to list a few of these angel investors: Joshua Schachter - del.icio.us./Yahoo, Adam Beguelin - Truveo/AOL, Michael Tanne – Wink, Jim Young – hotornot, Mike Arrington – TechCrunch, Mike Jones - Userplane/AOL, George Sarlo - Walden Funds, Frank Caufield - Darwin VC, Aydin Senkut - Felicis Ventures, Robert Simon - Alta Partners, Brad Feld – Mobius Ventures,… and more.

More:

• Yes, it is true that Dogster had several funding avenues, and the team elected to only raise a $1M round that ended up being oversubscribed (a lot).
• A great coverage is developing: Matt Marshall on VentureBeat, Liz Gaines on GigaOm, Dan Farber on ZDNet, Bambi Francisco, Tom Taulli on BloggingStocks.
• Rafat is already betting on a CNet take-out. Dude, please let me pay long term capital gains on an exit for once.
• Here is the TechMeme thread.

Bebo statistics explained

There has been quite a bit of confusion around the numbers I (and others) have quoted related to Bebo’s page views, uniques, etc. Jim Scheinman, Bebo’s VP of Business Development and Sales, kindly stopped by and clarified things in the comments of my original post on the company’s $15M financing:

Much of the confusion in the #s above (and frankly in many blog postings) about Bebo's and other SN site #s come from the mashing of various data sources. So, for example, while Bebo reported 2.5 Billion monthly page views (and we're actually just shy of 3 Billion now), we never reported the 1 million unique user #. In fact, I'm not sure where that came from, but I suspect it's a Media Metrix/Comscore unique user # for US members only. Our internal data shows that Bebo overall has significantly higher unique user #s, and you can do the research to see what 3rd parties report our monthly unique user # to be. Bebo's key markets are the UK, IE, US, CA, AU & NZ which comprises almost all of our traffic. So, the #s will vary if you're looking only at the US market (which many US publications do) or at Bebo's total market.
Also, when you use Alexa to look at traffic, you're looking at the total traffic from all countries. So, in Bebo's case, that'll be our total traffic from our 6 core markets. In Orkut's case, that'll be their total traffic, which is almost entirely from Brazil, and so on. The key thing to remember there is that not all traffic is created equally (ie--I'd rather own the UK market than the Brazilian market if my primary revenue source is advertising).

Thanks Jim, much appreciated.

Tag: bebo

Another day, another social network gets $15M: this time it is Bebo

A couple of weeks ago, this BusinessWeek piece provided a good background on the recent hyperactivity around social networks – especially when it comes to VC investments. Another large player, Bebo – the leading social network in the UK, Ireland and New Zealand -just raised $15M from Benchmark Capital – because it could.

Rafat Ali had the scoop – read his post for full details:

Bebo, an SF-based social networking site which is in the middle-ground between MySpace and Facebook, and among the biggest in UK, Ireland and New Zealand, has received $15 million in venture funding from Benchmark Capital.
Bebo will use the funding to expand the U.S. team and open a London office. It has also hired a chief privacy officer, who will be announced soon.
Bebo says it is also growing well in U.S. Australia and Canada. It has a total of 24 million registered members, turning 2.5 billion monthly page views. With the U.S. market awash with tons of social networking sites (MySpace and Friendster included), it probably makes sense to focus on UK and other markets. […]

Bebo has been focused on colleges and schools but plans to slowly open-up to include general members as well. It has also moved beyond profiles and comments, and has tied up with Skype to integrate voice, and has recently enabled video uploads and live streaming.

I met the CEO, Michael Birch and his lovely wife Xochi, a couple of months ago and they introduced me to Bebo at that occasion. The site seemed to enjoy a steady growth and is listed in the 10th position in the social network statistics post I published a couple of weeks ago. Alexaholic seems to give a slightly different ranking: Bebo.com shows as being larger than Tagged, TagWorld, Buzznet (Disclosure: one of my investments) and MyYearbook.

Bebo also won the People's Voice award for best Social Networking website at the most recent Webby Awards.

With 2.5 billion page views a month, and over a million unique visitors, Bebo seems to be doing quite well. It is going to be interesting to monitor its progress in the US and Canada market as it competes against large incumbents. Is there such a thing as competition amongst all these networks, or are people essentially hanging out in a few of them ? Views ?

PS: Paul in the comments points rightly out that the number of uniques and the page views don’t compute, but I have not found any other info than the numbers I have quoted – yet.

Tag: bebo

Visitors statistics of US social networking sites

Reading this story by the Deal about the gloomy outlook of Friendster, I came across a chart showing the unique visitors of US social networking sites (provided by Comscore, as of March 2006).

Quite stunning to see that 23% of US Internet users are visiting MySpace (1 in 4).

It would also be very interesting to see the percentage of overlap among visitors of these services.

David Hornik (sitting in fronf on me) tells that combining visitors to Six Apart’s LiveJounal and TypePad would make them rank pretty high on that chart (granted these are blogging platform more than social networking sites).

Quick LinkedIn update

LinkedIn has quietly been releasing a number of very useful features over the past few months, and I thought I would point them out as I find them really useful:

• Public profile: you can now expose elements of your LinkedIn profile - which is only feasible to people in your network - to all users. Your Public profile URL is http://linkedin.com/in/ACCOUNT_NAME (here is mine). And LinkedIn makes badges available too.
• You can now list your blogs and web sites in said profile.
• A feature I have been asking for 2+ years: you can now see the people who have recently joined LinkedIn in your rollodex - allowing you to decide who to invite more efficiently.
• For users of the Outlook toolbar, the Dashboard functionality gives you a list of people you could add to your address book (because you exchanged an email with them), people who are already on LinkedIn you could connect to, and most interestingly people in your rollodex whose contacts have changed.
• In the same toolbar Grab allows you to select someone signature block, and automatically extract signature fields to easily create a new address book record. As this is something that I do multiple times a day, this is proving quite useful - even if results are not 100% perfect.

Finally, and this is a fantastic achievement, LinkedIn is now profitable as announced by CEO (and good friend) Reid Hoffman in the second edition of TalkCrunch: Social Networks 3.0.

Disclaimer: I have no economic interest in LinkedIn.

Tags: linkedin

The NY Times on MySpace's economics and challenges

I came across this New-York Times article about MySpace, its economics and challenges: For MySpace, Making Friends Was Easy. Big Profit Is Tougher (sub req'd). It is full of interesting data points, and is especially interesting in the light of the growing importance MySpace has in the Web 2.0 ecosystem. Not only is MySpace the second largest Internet web site in page served, it has also become a common launchpad for new startups that offer widgets that can be integrated in users' home pages. Bambi Francisco had a good piece on this “trick” two weeks ago: MySpacenomics (sub req'd).

Interesting snippets:

• MySpace now has over 70 million signed users (but the article does not mention how many users are actually active - logging at least once in the last 90 days).
• As mentioned, only Yahoo serves more pages than MySpace which is getting close to one billion pages per day.
• The yearly revenue of MySpace is pegged at $200M, with an average CPM of 10 cents – which is very low. Yahoo’s revenue is about 20 times MySpace’s – based on a more efficient monetization of their traffic (and a suite of subscription-based services).
• MySpace has so much page views to monetize that even the largest advertising networks cannot/do not want to deal with the inventory. The following tidbit is telling:

A sign of that challenge is seen in Mr. Levinsohn's effort to expand the use of text ads — the rapidly growing format pioneered by search engines. He has been running tests with Yahoo, Google and several smaller ad providers and has sought proposals from them for longer-term deals.
The answer he received was a shock. Not one of them, not even the mighty Google, was sure that it could provide enough advertisements to fill all the pages that MySpace displays each day, Mr. Levinsohn said. The search companies did not want to dilute their networks with so many ads for MySpace users, whom they said were not the best prospects for most marketing because they use MySpace for socializing, not buying.

• Not surprisingly, MySpace is going to try and integrate advertisers and sponsors in the site, and build more precise profiles of its user so that given sub-demographics can be targeted more effectively.
• A marketplace or classifieds of some sort will eventually be developed.

NewsCorp is not only counting on MySpace in their Internet strategy:

Indeed, rather than squeeze all its Internet ambitions into MySpace, Fox Interactive is assembling a network of Web sites, including IGN, a collection of sites focused on video games, and Scout, which runs Web sites for about 200 local sports teams. The News Corporation is also developing a portal devoted to entertainment, drawing from its Fox network programs, the Page Six gossip column of The New York Post and show-business reporters at the 35 local television stations it owns, Mr. Levinsohn said.

Lots of comments on the article, which is currently on top of Memeorandum.

Tags: myspace

The Facebook unplugged at Stanford ETL

I have attended last night's session of the Entrepreneurial Thought Leaders (ETL) program featuring Mark Zuckerberg, the Founder and CEO of the Facebook, and Jim Breyer, Accel's Managing Partner who is sitting on the board of the company after his firm led a $13M round of financing (at a rumored $100M-ish post-money valuation).
The Terman auditorium was close to full to hear these two share their stories and experiences about the Facebook and its stellar growth. I have written about it in the past right after their financing, and actually this post is one of the most visited on my blog. Also check out their TechCrunch profile (and do read the comments from Facebook users).

Before I get into the actual session, here is an update on their metrics – which are (increasingly) stunning:

• 5M+ registered users
• coverage of 45% of US colleges (a total of 2,000 - representing 8M students)
• 80% penetration among students of colleges that are on the platform
• 10th most visited Internet site in the US
• 5.5B page/views a month (230M page/views a day)
• 8.5M unique visitors
• signing 20,000 new users a day
• repeat usage: daily 70%, weekly 85%, monthly 93% – can you think of another site that sees 93% of its registered users coming back every month ?

Mark Zuckerberg started the Facebook during his sophomore year at Harvard, in order to have a directory of students on campus in which they could list their profile, their activities and essentially what is going on with their lives. The application became popular beyond Harvard, and other colleges started requesting it.

Mark said that he has not conceived the Facebook as a social network  – which is a community application, it is a directory that he considers a utility that students use in order to find information which is socially relevant. Product development is about optimizing the application on scale and user experience, and adding new functionality: for example, they just added the ability to upload an unlimited number of photos. Expectation is that about 10 to 15% of the people on the network will upload photos.

One of the early design trade-off was to partition users by schools, and limit the visibility of profiles at school level. The decision was made in order to make the environment safer for their users, especially since 30% of them list their cell phones in their profiles. This contributed to an increased privacy, and a relative limitation of the number of  “lurkers:“ who are crawling other sites like MySpace.

On the reason why the first generation of social networks failed (as compared to MySpace and Facebook), he thinks that they have not focused on providing a set of utilities to their audience, they were merely about creating connections. They also had issues of scalability that plagued their growth.

Mark’s team is younger than most entrepreneur teams (many are under 21), and was originally made up of some of his college friends. The company has since quadrupled, and now has 40+ employees. They had started hiring engineers after Mark had built the first version of the site in a couple of weeks (note that he is a psychology major) and worried about scaling it. At some point they got an office, and had to face the issue of organizing the company and its product development, particularly in order to start releasing features in parallel as opposed to serially. Mark learned then the difference between managing dorm friends and employees who had to serve a community, and advertisers. Employees can’t be only engineers: finance, business development, sales became necessary functions to add.

The Facebook is recruiting heavily (Stanford) grads and experienced staff. Their primary criteria is raw intelligence, and alignment with the company’s market and culture. They actually don’t insist on raw development talent – more sheer interest and ability to get things done.

On international expansion, Marc explains that Facebook has to go  beyond internationalization and figure out the cultural implications of moving into markets like Europe, China, Japan,… The strategic choice so far has been to develop a high school product in the short term.

The session then moved into a Q&A with the audience that you can find in the extended post.

In a very timely way, Bambi Francisco has made a video interview of Mark Zuckerberg, which provides this data point about the original investor in the Facebook:

In the fall of 2004 former-PayPal-CEO-turned-hedge-fund-manager-and-angel-investor Peter Thiel -- whose fund is up 60%-plus this year -- gave Zuckerberg $500,000 to buy servers to support the growing audience base at Facebook. Thiel told me it's one of the best, if not the single best, venture investments he's made.

The video of the session is now available on the ETL website.

New LinkedIn good: user interface, search, contact requests and... a subscription

LinkedIn is introducing a number of key changes over the week-end.

For the first time in months, the site has been down most of Friday afternoon to deploy a new server infrastructure that will allow the company to scale to the next stage, from the current 3.3M users to at least double that. A new user interface, cleaner and nicer, has also been rolled out.

The most notable change however is the introduction of Business and Business Plus accounts, that will be – yes – subscription-based.

Personal Accounts users will still be able to use LinkedIn for free and register, create their network, and search and send contact requests to third degree connections. Four degree contact requests, that were too long and cumbersome to execute anyway, have been removed from the free option.

Users can now search through the entire LinkedIn database – with a new improved Name search, as opposed to just one’s network. Resulting contacts can either be accessed through contact requests (to the third degree), or through InMail – a new functionality that is part of the new Business Account offering. Reid details it in this announcement:

InMail™, a new service available exclusively through LinkedIn, allows you to receive business opportunities from other LinkedIn users directly onto your homepage without sacrificing privacy. You decide whether to receive InMail; you get to rate every InMail you receive to help ensure quality; and you choose when to share your contact information.

InMails are “guaranteed” to succeed within 7 days, meaning that one’s monthly credit will be re-adjusted if a request is not responded to in this timeframe. Furthermore, it is possible to choose whether inMails are to be received as they come, or once a week.

Business and Business Plus accounts are targeting professionals like recruiters, investors, consultants, analysts,… who leverage LinkedIn the most to search for references, candidates, or experts. Each level of subscription will have a set number of InMail and contact requests, and access to a new set of tools that will be introduced shortly.

Pricing of these accounts are:

• Business: $45 for 3 months, $150 for 1 year – providing 3 inMails and 10 active introductions (contact requests)
• Business Plus: $150 for 3 months, $500 for 1 year – providing 10 inMails and 25 active introductions

This latest move clarifies the LinkedIn business value proposition, and gets it closer to being a data provider, exposing user profiles whilst maintaining a certain level of privacy – since only profiles are available for contacts beyond the 3rd degree, not names.

Disclosure: I have no commercial or investment reliationship with LinkedIn, but I have a number of friends involved in the company, as executives, investors or advisors.

Murdoch: Yeah, I get this Internet thing - and here is a $580M check to buy a place for my friends

A few weeks back, there were reports of Rupert Murdoch “getting the Internet” (at least now) and being ready to make some major acquisitions. Here is the first one: MySpace, the “music+social network+cool features+tons of page views and users” company that was started less about two years ago. For how much ? Well, its parent, Intermix Media, was just picked up for $580M – and Intermix bought back for $125M the shares they had sold/granted to Redpoint and MySpace management back in February (that is – 5 months ago).

As discussed with friends at the last SuperNova, MySpace not being a mainstream blogging phenomena – unlike Flickr – did not generate a buzz commensurate to their hypergrowth and stunning numbers (as shown on this blogpulse chart) but the magnitude of the exit consideration surely is!

I am sure that Accel partners felt even better about their investment in Thefacebook this morning.

Check out:

• PaidContent for details and comments of NewsCorp execs about the deal
• Bill Burnham’s great piece on the engineering of the deal, and the returns of VantagePoint and Redpoint, the two VCs involved
• Bambi Francisco’s analysis of the deal (sub req’d), that can be summarized: “If next-generation media is about user-generated content, then MySpace.com may be the perfect centerpiece for tomorrow's media conglomerates“
• SiliconBeat’s question:  “Could this represent the peak of the current Web 2.0 wave?” Answer: No, IMHO.

Layoffs at Friendster, Sassa out, no movie ?

BusinessWeek TheBeat confirms the Layoffs at Friendster, scooped yesterday by Niall Kennedy (who announced massive layoffs initially, and then referred to a handful of people). What I had not heard (and was scooped by Jeremy) is that Scott Sassa, the Hollywood-originated CEO, will be leaving a a few weeks, and will be replaced by Taek Kwon, currently executive VP of product and technology at Citysearch.com.

Not surprising indeed, since Friendster has been for a long time in search of a way to monetize its (then) large audience (including a movie), and is facing strong competition from MySpace and others.
The other rumor is that the company is about to get additional financing, probably from current investors (Kleiner Perkins Caufield & Byers, Battery Ventures, Benchmark Capital). Difficult to see an upround coming through here, given that the last was at a post-money valuation of $53M.

No the real question: what is going to happen to the Friendster movie :-) ?

The first generation of social networking sites (Friendster, Tribe, ZeroDegrees, Orkut, ...) have all gone through ups and downs (more downs) as they were pioneering in this new space - and not really figuring out a business model for themselves, besides advertising. Social networking is now an integral part of the fabric of Internet applications, but offers limited value in its own right - with a very quick decay of one's interest.

Until Y!360 gets integrated in My Yahoo, or vice-versa, I will not feel compelled to visit it that often. Whilst it is a neat implementation, and useful integration of certain (still marginal) services, I don't have any reason to come back to it again, and again - as I do with My Yahoo. But I remember the morning it was released: we were all super excited, until we had  received our invitation, connected with our usual friends on that SN, had discovered the main  features and posted about them. Kids with new toys, sort of.

At the end of the day, only LinkedIn still gets my "eyeballs", and generates value for me.