DARE - Because Entrepreneurs Do

As networking sites prove to be a major pull for internet users, a host of Indian startups are eyeing the sector

On the Internet, India follows the West. Whether it was news portals, web-based email or second hand sales, enterprising Indians have built out copy-cat business for themselves based on the success of such companies in the West. But what about social networking ?

A clutch of Indian companies - from fresh-out-of-college graduates to big conglomerates like the Reliance Anil Dhirubhai Ambani group (RADAG) are pouring in crores of Rupees trying to organize your social life. Is this the second dotcom bubble or the next big thing on the internet?

What is a networking platform?
It is a website that provides just a platform, and leaves the content to be created by the users. Such sites are part of the user generated content (UGC) phenomenon born out of the covergence of communication (one-to-one delivery) and broadcasting (one-to-many distribution).

Despite all the hype surrounding such businesses (Web 2.0), it is hardly a new way of content creation. Ebay, geocities and the early usenet are examples of networking platforms.

However, since the time of usenet and text based usergenerated content, platforms like youtube.com and flickr.com have expanded it to rich media such as images and video. With the latest social networks mixing rich content sharing with personal profiling, the platform business has hit the roof in popularity, with the top ten platforms like myspace and facebook estimated to account for around 250 million unique users per month - nearly a third of the total internet users worldwide.

The mad race
Myspace, Facebook, Flickr and Orkut started off in late 2003/early 2004 and were followed by Youtube, in 2005. Compared to this Yahoo launched in 1994 and Google, in 1999.

Yet, despite their relative youth, these sites account for a disproportionate share of the online user activity. According to Hitwise, which tracks internet traffic through user-monitors and third-party data, 4 out of the top10 sites in the US by page-hits are networking sites.

To further get an idea of their popularity, compare their visitor traffic with two of the oldest and the two most popular websites on the internet - Yahoo and Google. According to internet data analysts compete.com, Yahoo had close to 130 million unique visitors in October 2007 and Google had 125 million. The largest platform site - eBay had 74 million unique visitors, and MySpace had 65 million.

While the visitor numbers are only about half that of Google and Yahoo, they are many times that of the two largest traditional content or media sites - CNN (24 million) and NYTimes (11 million). Another interesting aspect is that each user spends much more time and views more number of pages on each of their visit compared to portals like Yahoo. For example, visitors to Myspace spent an average of 24 minutes per session on the site compared to just 6.5 for Google.

DARE/top five networking sites
U.K.	FRANCE	GERMANY
bebo.com	Skyrock Network	myspace.com
myspace.com	myspace.com	StudiVZ Sites
facebook.com	badoo.com	jux.de
hi5.com	netlog.com	piczo.com
faceparty.com	hi5.com	stayfriends.de
Source: comScore World Metrix

Another factor in favour of such platforms is the extreme adoption rates. For example, a study by online intelligence firm Comscore in August found that nearly 78% of the internet users in the UK were members of one networking site or the other.

Expectedly, the high visitor rates have set off a valuations race with both traditional media houses and portals trying to acquire platform operators. The first big deal in this space happened 2 years ago when Rupert Murdoch’s News Corp bought MySpace for $580 million (Rs 2,320 crore). This was followed by Google's $1.65 billion youtube buy. Both were just around 18 months old when they were sold. Since then, valuations have risen sharply. The latest deal - Microsoft’s acquisition of 1.6% of Facebook in October values it at $15 billion (Rs 60,000 crore).

The India effect
The high valuations have had an impact on the Indian platform scene as well. Traditionally, only two kinds of online companies have survived in India - those selling traditional content and deriving their revenues from advertizing, and niche services with a fixed subscription fee, such as matrimonial services.

“At that time, we considered launching the boy-meets-girl network and we also knew it would become very popular," says Manish Agarwal, VP for Marketing at Rediff which launched one of India’s first pure networking service - Connexions - a year and a half ago. " But we were not sure we would be able to monetize it.. it was easy to target and sell ads on a professional network, but a boy-meets-girl was considered tough," he adds.

While Rediff hesitated, another network, Hi5, started by US-based Ramu Yalamanchi targetting the Indian diaspora caught on among teens and students in 2005. However, Hi5 was soon overtaken by Orkut which was started by a Google employee in 2004 and later taken over by Google. Today, out of the estimated 25 million regular internet users in the country, around 10 million are members of the community, according to industry estimates. In a survey conducted by online research firm Juxtconsult among 10,000 households 6 months ago, 50% of the respondents said they went online for dating and friendship, with 44% using social networking sites for the purpose.

Interpreting European internet traffic data for August, Comscore found that 78% of all online Britons use social networking sites (excluding pure content sharing sites.) The figure was 61% in Spain and around 50% in other West European countries. Depending on the country, each user ‘contributed’ between 250 to 840 pages views a month. According to the same firm, an average Indian online user consumed around 1,400 web-pages during May. Assuming that an average Indian social network user consumes around 350 pages a month and that around 40% of Indians use such friendship networks, such sites account for about 1/8th of total Indian page-views.

This growth from virtually nothing to 12.5% of the total clicks in just 2 years has Indian companies excited. A number of companies, including MingleBox, Yaari, IndiaRocks, Rediff and Bigadda, are jostling for space in the market. Two of the early movers, Fropper and DesiMartini, have reinvented themselves as social networks, shedding their dating tag. The market, however, still continues to be dominated by Orkut, with around 2/3rd marketshare, according to Juxtconsult.

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