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Why WetPaint & Other UGC Sites Get Big Money
First the money flowed to social sites like Facebook that showed the world how to get users to interact. Then it moved on to “roll your own” platforms like Ning that allowed people to build their own social microsites. But as Web 2.0 startups get increasingly specialized, the money is following, as today’s announcement from social publishing platform Wetpaint of a $25 million Series C funding round, shows.
In the wake of Ning’s $60 million Series D round, which pegged that company’s valuation at $560 million, startups that encourage users to collaborate and publish remain hot. According to Wetpaint CEO Ben Elowitz, the build-your-own-Wiki site is adding 2,000 new sites a day — a compounded monthly growth rate of 20 percent. “When we launched, we wanted to tackle social publishing,” he said. “Our goal was a consumer-friendly wiki.” Today’s round, which was co-led by DAG Ventures, brings total investment in the Palo Alto, Calif.-based firm to $40 million. Update: Fidelity Investments joined as an investor with this round as well, Kara Swisher notes, though exactly how much it invested is unclear.
Some user-generated content (UGC) sites are showing remarkable growth. StartYourTube, which wants to do for video publishers what Wetpaint does for wikis, added 14,000 microsites in the 12 weeks following its launch. And Ning Co-founder Marc Andreesen said recently that the white-label social network was running more than 200,000 social networks, with an estimated 1,500 new networks a day.
But it’s not just the quick adoption that drives valuations. UGC sites fare better with search engines. In one case, a Wetpaint-run wiki on the Sarah Connor Chronicles had six times as many Google page one search terms as the official Fox site. The wiki format also works better than traditional discussion forums; Wetpaint’s wikis get roughly a hundred times more inbound links than message boards covering the same topic.
As a result of all this, UGC sites can charge higher-than-average advertising rates. “We’re seeing 10 to 20 times the clickthrough rates [of regular social sites],” said Elowitz. “The content and consumption is extremely topical.” Wetpaint is even considering creating its own ad network.
Alongside the funding announcement, the company is launching “Wetpaint Injected,” a way of embedding Wetpaint wikis directly into blogs and sites. Because of the way Injected is designed, search engines properly attribute the UGC to the site in which the wiki is embedded. This helps the site’s rankings significantly, and turns publishers into Wiki destinations. Companies like IGN and Flixster have already announced plans to adopt the technology. “Every time we have provided our community with tools for self-expression the results and creativity of our users have been incredible,” said Steven Polsky, Flixster president and COO.
Indeed, the services of startups like Wetpaint make sense for the likes of large publishers, consumer products companies and broadcasters, all of whom are eager to continue to engage with customers online. With embedded UGC, they not only get “gently walled” gardens in which that dialogue can take place, but get to boost their search rankings, too.
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Fubar Grows Over 3 Million Percent In A Year
New social network traffic figures released by Compete show that Fubar, billed as the “first online bar and happy hour” is the fastest growing social network, having increased its traffic by 3,272,217% over the 12 months to the end of February 2008, placing the network at 14th on the list of top 20 social networking sites (chart as shown).
Year on year MySpace hasn’t grown at all, managing to lose 1% of traffic compared to Facebook with 77% growth.
The other big gainers year on year include Ning at 4803% (sneaking in to 20th place) and Twitter with 4368%.
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IAC’s Diller Summons Flixster To New York Just To Kill The Deal
The much anticipated IAC/Flixster acquisition isn’t going to happen, we’ve heard. The two parties got very close to a deal. Then, says a source, IAC summoned Flixster to a meeting in New York where they were told it wasn’t going to happen.
Why fly the company all the way to New York just to reject them in person? It seems like the polite thing to do would have been to just tell them by phone.
The reason for the change of heart? The price, rumored to have ballooned to $200 million or more, just wasn’t supported by Flixster’s declining unique visitor numbers - Flixster went from a high of 12 million monthly uniques in May 2007 to just 6.8 million in December. And IAC chief Diller’s ongoing battle with stockholder John Malone may have caused them to be more cautious with acquisitions.
Whatever the reason, Flixster’s back on the market. With such a hefty price tag, however, they may be there for a long, long time.
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Flixster-IAC: Deal or No Deal?
It’s like the Silicon Valley version of the boy who cried wolf. The IAC-Flixster deal, that is. Earlier this month, TechCrunch and The Wall Street Journal’s “Deal Journal” blog reported on rumors that Barry Diller’s IAC was buying Flixster, a movie-fan web site that has gained a lot of traction thanks to its Facebook application.
Now I heard the same rumor, except this time those in the know said the deal was finally done, with a price tag of $200 million — of which $100 million is an “earn out.” Now that would be a handsome payout for Flixster, the San Francisco-based company that has raised about $2 million from Lightspeed Ventures and other angels. Even though it was a rumor, it still needed checking out. I called IAC and a spokeswoman was pretty categorical in denying the deal, saying:
To be clear, we have not acquired them and there is no deal in the works. Whatever information you have is completely inaccurate.
So there you have it. No deal.
The reason there are a lot of rumors floating around Flixster is because it has a direct bearing on the Facebook app community. A big-ticket exit (like the one rumored) would pump more hot air money into the Facebook ecosystem, which has yet to prove its money-making potential. We recently saw East Coast mutual funds pump $50 million or so into San Francisco-based Slide at a massive half-a-billion-dollar valuation (say what??!!).
Flixster has been using the Facebook app to basically pump up its growth. According to comScore, Flixster has about 15.4 percent of the total Facebook audience. The deal bodes well for other high-traffic (if not high-profit) apps on Facebook, such as iLike and Mesmo TV.
Jeremy Liew of Lightspeed Ventures (investors in RockYou and Flixster) had posted his thoughts on building a “business” based on widgets and Facebook apps. It outlines the challenges and opportunities associated with this “business.”
IAC “Very Close” To Acquiring Flixster
In late October we reported on well placed rumors that IAC was in talks to acquire movie-centered social network Flixster. Those discussions reportedly stalled, likely over IAC’s preferred deal structure (partial buyout with an option for the rest) and/or Flixster’s declining traffic and visitor count.
Now perhaps, those discussions are back on track. One source says the deal is done. Another says the parties have been in serious discussions over the last couple of weeks and are “very close,” but no deal has been closed. Both agree the price is over the $150 million being discussed last year, and may be as high as $200 million or more. The deal is being structured as a cash plus earnout transaction.
Flixster had an up and down year in 2007. They started off strong (”growing like a weed“) and have grown to 43 million user home pages. Traffic grew to 12 million unique worldwide visitors and 358 million page views in May. But it has fallen since then. In November, Flixster had just 8.2 million visitors and 139 million page views (source: Comscore). Over 1.2 billion movie reviews have been written by users.
Those declining visitor and page view numbers don’t seem to be a concern to IAC, according to our sources. They just like the company and its loyal users.
Flixster, based in San Francisco, raised $2 million in funding in February 2007 from Lightspeed Ventures and a number of angel investors.
I’m expecting to hear more news in the next couple of weeks. With the current information we’ve received, I put a over-under on a deal getting done with IAC at about 66%.
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Tuesday Morning Bag O’ Goodies
- Sprint’s acting CEO Paul Saleh speaking at a UBS conference said that spinning off the WiMAX business is an option. “We are looking at ways of attracting capital to that [WiMax] business.”
- NBCU CEO Jeff Zucker: “We have to make sure we’re not replacing dollars with pennies.”
- AllThingsD: Barry Diller’s IAC and Flixster, the social network for movie-lovers are talking again, after not talking, and talking…Somebody please buy Flixster, so we can all move on.
- dopplr is finally going mobile. What took them so long!( via)
- VCs are investing in content companies, talent agencies want to be VCs. It is a match made in Hollywood.
- For VCs investing in clean tech, a quick word: this ain’t Web 2.0.
Details Revealed: Google OpenSocial To Launch Thursday
Details emerged today on Google’s broad social networking ambitions, first reported here in late September, with a follow up earlier this week. The new project, called OpenSocial (URL will go live on Thursday), goes well beyond what we’ve previously reported. It is a set of common APIs that application developers can use to create applications that work on any social networks (called “hosts”) that choose to participate.
What they haven’t done is launch yet another social network platform. As more and more of these platforms launch, developers have difficult choices to make. There are costs associated with writing and maintaining applications for these social networks. Most developers will choose one or two platforms and ignore the rest, based on a simple cost/benefit analysis.
Google wants to create an easy way for developers to create an application that works on all social networks. And if they pull it off, they’ll be in the center, controlling the network.
What They’re Launching
OpenSocial is a set of three common APIs, defined by Google with input from partners, that allow developers to access core functions and information at social networks:
- Profile Information (user data)
- Friends Information (social graph)
- Activities (things that happen, News Feed type stuff)
Hosts agree to accept the API calls and return appropriate data. Google won’t try to provide universal API coverage for special use cases, instead focusing on the most common uses. Specialized functions/data can be accessed from the hosts directly via their own APIs.
Unlike Facebook, OpenSocial does not have its own markup language (Facebook requires use of FBML for security reasons, but it also makes code unusable outside of Facebook). Instead, developers use normal javascript and html (and can embed Flash elements). The benefit of the Google approach is that developers can use much of their existing front end code and simply tailor it slightly for OpenSocial, so creating applications is even easier than on Facebook.
Applications can have full functionality on profile and/or canvas pages, subject to the specific rules of each host. Facebook, by contrast, limits most functionality to the canvas page, allowing a widget on the profile page with limited features.
OpenSocial is silent when it comes to specific rules and policies of the hosts, like whether or not advertising is accepted or whether any developer can get in without applying first (the Facebook approach). Hosts set and enforce their own policies. The APIs are created with maximum flexibility.
Launch Partners
Partners are in two categories: hosts and developers. Hosts are the participating social networks, and include Orkut, Salesforce, LinkedIn, Ning, Hi5, Plaxo, Friendster, Viadeo and Oracle.
Developers include Flixster, iLike, RockYou and Slide.
What This Means
The timing of OpenSocial couldn’t be better. Developers have been complaining non stop about the costs of learning yet another markup launguage for every new social network platform, and taking developer time in creating and maintaining the code. Someone had to build a system to streamline this (as we said in the last few sentences in this post). And Facebook-fear has clearly driven good partners to side with Google. Developers will immediately start building on these APIs to get distribution across the impressive list of hosts above.
And they’ll do it soon, too. It’s clear that the developers who arrived early to the Facebook Platform party won easy customers. Those that came later had to fight much harder. Developers found their new gold strike, and they will soon all be there, mining away.
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Flixster For Sale; IAC Interested
Fast growing movie-centered social network Flixster has been making the rounds with potential buyers, we’ve heard from multiple sources. And IAC may have submitted a letter of intent in the last week or so.
The San Francisco based company has had a meteoric rise since launching in January 2006, although Comscore suggests growth has stagnated over the last few months - worldwide unique visitors went from just over 12 million in May 2007 to just 8.4 million in September, a drop of about 30%. Compete and Alexa show a similar decline beginning in May, but with a subsequent full recovery and then some.
IAC’s offer, we’ve heard, may value the company at $150 million. However, IAC has a tendency to do complicated investment deals where they get a minority or majority stake in the business v. an outright acquisition. They own a majority stake College Humor/Vimeo (same parent company) and GarageGames, and a minority stake (rumored at 25%) in iLike through an investment by subsidiary Ticketmaster.
Flixster may not be very interested in a partial buyout, but interest from IAC could lead others to enter a bid, too. More on this as it develops.
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Flixster Hits 10 million Registered Users
You don’t see this every day. San Francisco based Flixster’s growth, which shot up late last year, shows no signs of slowing anytime soon.
Joe Greenstein, Flixster’s CEO, told me by email that they now have ten million registered users and up to two million movie ratings completed daily (380+ million movie ratings to date). That’s a lot of (very valuable) user generated data. Comscore continues to show a sharp rise in page view and unique monthly visitors as well. Compare the charts below (U.S. user data only), which show data through February 2007, to the December stats we published in February.
There have been some complaints about Flixster’s aggressiveness in getting users to invite friends to the service as well. Like all services, they have to be careful about where they draw the line.
Flixster’s revenues will start to increase as large and highly relevant movie marketing budgets start to really focus on this targeted audience. Fandango now claims to generate only half its revenue from ticket sales, the rest coming from advertising and other sources. Comscore says Flixster is already bigger than Fandango, and moving in the right direction v. IMDB (see last table below).
LightSpeed Ventures was very smart to invest in this company, which is still just seven people. They are now hiring three more. If you’re looking for a job in San Francisco, apply. This thing has liquidity event written all over it.
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Flixster Growing Like A Weed
After reporting that Flixster closed a highly competitive venture round earlier today, I did some digging on available growth statistics for the service. According to recent Comscore data, Flixster has had a terrific period of unique visitor and page view growth over the last several months. Alexa and Compete also show a solid growth trend.
Comscore data graphs are below. They show Flixster growing from 4 million to 31 million monthly page views from March - December 2006. In that same period, unique visitors grew from 328,000 per month to just over 1 million. Comscore generally under reports younger, smaller sites, but the trend is clear.
Flixster is still a small social network, but the growth trends are way up and to the right. Venture capitalists, not surprisingly, like to see this in a potential investment.
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Flixster Closes Very Competitive Financing Round
Flixster, a San Francisco based social network where users rate and discuss movies, closed a round of financing today with LightSpeed Ventures. This was a small round of financing - $2 million or possibly less, but there was apparently heavy competition from Sequoia Capital in the deal (and possibly Kleiner Perkins). Flixster has recently seen very heavy user registration and page view growth, so a sub-$10 million valuation, which this deal almost certainly was, could be considered quite cheap.
There are also rumors that major studios got involved in the Flixster bidding as well, either as an investment or an outright acquisition.
Look for an announcement in the coming weeks.
Update: Comments from founders in the comments (on their way to Aruba apparently) confirming the deal, and traffic stats in this post.
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