Have you got Friendster?

When the news hit the streets in December of 2009, it took most people by surprise. Majority of people-on-the-streets’ (probably with Facebook accounts) initial thoughts were – who would want to buy Friendster and why would anyone want to buy Friendster?

An old social networking service that was established in 2002, Friendster had grown to become one of the most popular networks in Asia Pacific today. In a worldwide analysis, it was found that the top 15 countries accessing Friendster are: Philippines, Indonesia, Malaysia, The US, Singapore, Canada, India, Australia, UK, Hong Kong, Japan, United Arab Emirates, China, Taiwan and Korea.

With all these scenario, it attracted business opportunities but the owners decided to decline buyout offers, even that from Internet heavyweights such as Google. In 2003, it was reported that Friendster’s management received a USD$30 million buyout offer from Google but declined it. No reasons were highlighted.

Then in the Fall of 2003, The Wall Street Journal reported that Friendster received investments from former executives of Internet companies, including Yahoo Inc., and raised a whopping USD13 million financing round led by Kleiner Perkins Caufield & Byers and Benchmark Capital. Since then, the company has worked to develop a profitable business model.

That year, Friendster’s expansion included a package for Scott Sassa, a former NBC executive, as the new chief executive. With the hire, Friendster appears to be trying to shed its online dating image and to evolve into a media company. Ideas about new interactive programming on Friendster based on the networking taking place on the site was speculated but the new management at the time, kept mum. Friendster was also seen defining its initial business model: advertising-backed programming rather than dating-service fees.

Within that era, analysts were not too thrilled with the online scenario as it sounds like a journey back to the good old dot-com days. Despite all the restructure and a new strategy kicking in, in those early years, analysts were skeptical about most social networking firms ever becoming profitable. Social networking is very exciting as a concept but not as a business, was the main feeling towards this sort of ventures.

In today’s day and age, it has been proven that social media is huge and it is definitely not going away. As the global race heats up, one of it’s closest competitor, Facebook soared at more than 400 million active users worldwide. There are more than 100 million active users currently accessing Facebook through their mobile devices. There are more than one million developers and entrepreneurs from more than 180 countries for Facebook. There is no question that people continue to gravitate in droves towards social networking and blog sites.

In the U.S. alone, total minutes spent on social networking sites has increased 83 percent year-over-year. In fact, total minutes spent on Facebook increased nearly 700 percent year-over-year, growing from 1.7 billion minutes in April 2008 to 13.9 billion in April 2009, making it the No. 1 social networking site when ranked by total minutes for the month. Analysts recently placed Facebook’s worth at USD$10 billion.

In Malaysia, 80% of affluent Malaysians (those with a household income above RM5,000) use social networking sites. Report shows strong engagements in the Social Media Malaysia (nearly 3.8 hours per visitor and 22 visits per visitor). Facebook is however the clear leader in social networking sites in Malaysia with 77% reach of Malaysian web population.

For Friendster, there are more than 115 million members worldwide making it one of the leading global online social network but not the top 5 spots. More than 60 million users visit the Friendster website per month making it one of the most visited websites on the Internet these days.

Then, it attracted the attention of a local home grown Malaysian company, MOL. The company was founded in February 2000 and later listed on the MESDAQ Market of Bursa Malaysia Securities Berhad under the Technology Sector in December 2003. It went through privatization by its controlling shareholders in February 2008.

In October 2009, Friendster and MOL entered a global partnership where MOL was appointed to provide an integrated payments platform, as a foundation for The Friendster Wallet and The Friendster Gift Shop, for Friendster’s users.

Friendster’s move was to have access to MOL’s 500,000 payment channels across more than 75 countries worldwide. Apart from that, MOL is linked to 88 banks in 9 countries worldwide making MOL one of Asia’s fastest growing payment systems in developing nations with over 5,000,000 transactions per month. It’s no easy feat but it also processes more than USD200 Million worth of transactions in a year. Most importantly, more than 2.9 billion people around the world can easily access their online, virtual and physical payment channels. With this distribution capability and vast market potential that Friendster could tap on, it makes perfect business sense, …… for Friendster.

Following the acquisition, the operations of MOL and Friendster was combined to create Asia’s largest end-to-end content, distribution and commerce network, pairing MOL’s offline retail channel partners and payment platform with Friendster’s large online footprint, social network and user community in Asia.

Jon Gibs, vice president, media and agency insights, Nielsen Online said, “We have seen some very exciting growth in Facebook during the past year, and a subsequent decline in MySpace. Twitter has come on the scene in an explosive way perhaps changing the outlook for the entire space. The one thing that is clear about social networking is that regardless of how fast a site is growing, or a how big it is, it can quickly fall out of favor with consumers.” He also remarked “Remember Friendster? Remember when MySpace was an unbeatable force? Neither Facebook nor Twitter are immune. Consumers have shown that they are willing to pick up their networks and move them to another platform, seemingly at a moment’s notice.” Friendster needs to be relevant to what the market needs.

If Friendster wants to stay relevant and would like to create an evolution in advertising that would create a two-way conversation with the consumers, Friendster needs to be a part of the user experience and foster social interaction with their target audience. The challenge is of course, had always been, how to monetize the huge database and build up ARPU.

Ganesh Kumar Bangah, president and chief executive officer of MOL at the announcement of the merger said “The merger with Friendster will continue to transform the social networking industry, combining a highly intuitive and successful social media site and online marketing channel with an integrated payment platform and content network which includes games, goods, gifts, music and video. We are creating a unique company that will be well positioned to provide content to a huge, regional user base, here in Southeast Asia,” said

He also said, “The new combined entity gives Friendster the kind of financial backing, retail distribution, and e-commerce infrastructure that will enable us to accelerate our strategy and create a locally relevant, fun experience for our users in Asia, both on and offline.”

We would like to know how far has this plan gone? What are the achievements thus far and what are the marketing effort that has been put in place to ensure the success of this merger.

So, have you got Friendster?