Wednesday, April 19, 2006

Social Networking's Gold Rush

Business Week: "Just a few months ago, many experts and investors were inclined to dismiss social networking sites as a mere fad. Regardless of how many members sites such as MySpace (NWS ) and Facebook racked up, critics warned that supposedly fickle young Internet users were likely to rush away as soon as the next hot startup came along. And some advertisers were skeptical about the effectiveness of the medium, which features user-created content of a sometimes questionable nature.

Those fears could still turn out to be valid. The sky hasn't fallen yet, though. So with each passing month, investors, big media companies, and advertisers are being forced to seriously consider whether social networking sites can have a viable long-term business model. Whether or not there's a future for social networking, players that are high on the sector's prospects, or simply don't want to miss out on its potential, are pouring in serious money (see BW, 4/10/06, 'Socializing for Dollars').

HOT PROPERTIES. These days, new deals are made almost daily. Facebook, a site for college and high-school students, plans to announce Apr. 19 that it has raised $25 million in its latest round of funding from venture-capital firms. That same day, Rupert Murdoch's News Corp. (NWS ), is expected to announce that it is taking a minority stake in SimplyHired, a job-hunting site with a strong social-networking component.(Murdoch jumped into the sector last year with the acquisition of MySpace, the leading social-networking site with a large number of teenage and young adult users.) Meanwhile, on Apr. 17, social-networking site Visible Path said it raised $17 million in venture capital (see BW Online, 04/18/06, 'MySpace For the Office'). "

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