Financial Times: A future alongside Facebook
Thursday, February 25th, 2010Hyves versus Facebook is een populaire discussie, de Financial Times doet ook even mee… Hieronder het hele artikel indien de link niet toegankelijk is.
`Pierre Bellanger cannot help heaving a sigh. “Prior to Facebook, the landscape was simple,” says the chief executive and founder of Skyrock , the French social networking site. “We were the absolute dominant player in France. People used Skyrock for their blogs and MSN for chatting. Now we are no longer alone, we are in an ecosystem where we have to fight hard for market share. We are sharing the time of our users with Facebook.”
In fact, Skyrock has lost about a third of its audience to the US challenger. “Around 25 to 30 per cent of our users found in Facebook a better experience for what they wanted. Around 30 per cent use both, and 30 per cent are not interested in Facebook,” he says.
Skyrock is not alone in its battle against Facebook. Over the past two years, European social networking sites have experienced a devastating invasion of their territory by Facebook. Until then, sites such as StudiVZ in Germany, Skyrock in France, Tuenti in Spain and Hyves in the Netherlands, were undisputed leaders in their domestic markets. Published in their home languages, the sites were limited in international expansion, but had deep roots in their home countries.
MySpace made little inroad against them, but Facebook, which in 2007 started a big effort to translate the site into local languages, is different. It now has more than 400m customers globally and is the market leader in many European countries.
A year ago, Skyrock and Facebook were neck-and-neck in terms of popularity in France, but the US site now far outstrips all rivals. It has 22.6m users in France, about twice the number of Skyrock, according to Comscore, the market research company.
The same picture pertains elsewhere. In Spain, Facebook overtook Tuenti last year, and now has 10.5m users compared with the Spanish site’s 6.8m. In Germany, the StudiVZ group of three websites are still collectively the market leader with 13.8m users, but Facebook is closing in fast with 11.5m. In a year, Facebook’s user numbers have more than tripled, while growth in StudiVZ user numbers is flat.
Clemens Riedl, chief executive of StudiVZ, is angry because he says his company is not able to compete with Facebook on a level playing field. German social networking sites face strict local privacy laws, meaning they must undergo a long process of verification and users positively opting-in before they can be signed up. The sites are also prohibited from sharing certain user data with advertisers. But US companies are exempt from these rules under “safe harbour agreements” between the US and the European Union.
“Most things that Facebook does are illegal under German law,” says Mr Riedl. “In comparison, competitors like us will always look flat and static, because we cannot do these things. It is a failure of politics that cuts us off from the most lucrative markets.”
Only Hyves retains its dominance, with 7.6m users, compared with 3.3m for Facebook. However, Facebook tripled in size in the Netherlands last year while Hyves grew 31 per cent.
European networking sites are adamant, however, that they have a future and can fight back.
Mr Bellanger says: “Is it a winner-takes-all situation and we will all die, or is it an ecosystem? I believe that if you do something well you will continue to exist. But Facebook clones will be ‘Friendster-ised’.” He is referring to the US social networking site that rapidly gained popularity when it launched in 2003, but quickly lost ground to rivals such as MySpace and Facebook everywhere outside Asia.
The European sites are also pinning their hopes on the enduring appeal of the local element. Zaryn Dentzel, an American who co-founded Tuenti with Spanish friends four years ago – the name comes from tu entidad , Spanish for “your place” – says: “Niche services have a lot of value in the local context. We want to build a social network that everyone in Spain has to be on. If you are focusing on getting every single human being on the planet on your network, it’s a very different approach.”
He adds that if Tuenti succeeds in Spain he will raise more money and try to take the deeply local approach to other countries as well.
All of the European site founders say the key to their long-term survival is differentiation. One of Skyrock’s features, for example, is that users mostly have anonymous blogs rather than creating profiles under their own name. Mr Bellanger says many of its mainly teenage users prefer this anonymity.
Tuenti, meanwhile,prides itself on having a high-quality network that people join by invitation only. Their names cannot be indexed by search engines, making the experience very private and secure. This slows user growth, but ensures the site stays relatively free of scams and fakes.
StudiVZ, meanwhile, focuses on at-tracting a different audience from Facebook. “Facebook is very cluttered,” says Mr Riedl. “We try to keep our site very simple . . . [and] we have targeted women, and people who don’t love technology.”
The sites are also building deep ties with local institutions, incorporating television shows, music and events into their sites. Hyves, for example, sponsors the Dutch national football team and undertakes surveys for RTL, the TV station, which are a regular feature on its breakfast news bulletin.
Skyrock and its peers also claim to offer advertisers a more tailored experience. Mr Bellanger calls it “haute couture advertising”. Skyrock built a customised website for Coca-Cola, Kohop , where young people recruit others to join community projects such as cleaning up a beach or raising money for Haiti’s earthquake victims. The emphasis is on positive action and the corporate branding is subtle.
Mr Riedl at StudiVz says: “We can’t just sell data, so we have to have more creative campaigns. We have our own in-house agency that helps brands set up viral campaigns.”
Hyves is working with Rabobank, the Dutch bank, to develop a payment system that can be used over the social networking site. It is also working with clubs and bars to create a service where users can order and pay for drinks through this system. “Our aim is to be an integrated part of Dutch life,” says Raymond Spanjar, one of Hyves’s co-founders. He estimates 57 per cent of the Dutch population over 13 years old uses Hyves.
All the sites work with big, global advertisers. Stafford Green, head of digital at Coca-Cola, says that it cannot afford to ignore the niche local networks. “It would be great if it was like the olden days when there was just one place like TV where you could reach everyone, but those days are gone,” he explains.
A sign that local social networks could have a future is in the financial numbers. Hyves’s revenues are set for a relatively modest €20m ($27m, £18m) this year, but – unlike Facebook – the company has been profitable since 2006. The Skyrock group, which includes an FM radio station, had revenues of €38m last year, and earnings before interest, tax, depreciation and amortisation of €7m, of which about €5m came from the internet. Tuenti had sales of less than €5m last year, but expects to break even in the third quarter of 2010. However, StudiVZ, which was bought by Georg von Holtzbrinck, the publishing group, for €85m in January 2007, had revenues of about €18m, and is still lossmaking.
Jeff Mann, an analyst at Gartner, says that while some local social networking sites are likely to disappear, there are just as likely to be survivors, too. “Social networking is so culturally and personally driven that there is room for several players,” he says. “Some, like Hyves, may have established enough of a beach-head and be able to defend it. They may not operate on a corporate-jet level and be invited to Davos, but they can be viable little businesses.”
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