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Friendster Expands Its Network


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By Cynthia L. Webb Staff Writer
Thursday, June 3, 2004; 9:25 AM

It pays to have friends online, six degrees of them to be precise. That's the theory propelling the growth in social networking sites. And in a sign that business is booming, Friendster has pegged Scott Sassa, a former NBC executive, as its new chief executive.

Sassa's recruitment "represents the latest move by Friendster of Mountain View, Calif., to transform itself from a quirky Internet start-up to a profitable online business," The Wall Street Journal reported. Sounds like a throwback to the good old dot-com days.

More from the Journal: "Last fall, Friendster, which helps connect people through friends they have in common, received investments from former executives of Internet companies, including Yahoo Inc., and raised a $13 million financing round led by Kleiner Perkins Caufield & Byers and Benchmark Capital. Since then, the company has worked to develop a profitable business model. 'Another step in that process is recruiting a world class chief executive, somebody with real experience in building and running companies, to come on board,' said Friendster founder Jonathan Abrams, who will remain chairman. 'Scott fits that.'"

So how does the site plan to make money? Sassa hinted to the Journal that the "A" word is in the mix (advertising). "Mr. Sassa declined to disclose his specific plans for Friendster, but said he believes the service could be used to advertise products. 'We think there's a big opportunity around using social networks to recommend products because you have that trusted reference,' he said." Friendster has more than 7 million members, the Journal and other media outlets noted.
The Wall Street Journal: Friendster Hires Scott Sassa, Former NBC Executive, as CEO (Subscription required)

The San Jose Mercury News wrote that "Sassa's appointment suggests that Friendster, which long offered its services for free, is now getting serious about making money. It also signals the main way it plans to do it: advertising." The article noted that Friendster's meteoric rise in popularity "also sparked a number of copycats, both in the form of start-ups hoping to compete with Friendster head-on, but also among online-dating incumbents adding similar features. Google's Orkut is one such competitor; San Francisco's Tickle is another. Sassa said he won't divulge specific details about Friendster's business plans until later. However, he said recent technologies, including digital video recorders, mean people see fewer commercials about products they might want to learn about. The power of a social network, such as Friendster's, is that it allows users to learn about such products from trusted contacts, he said. 'It allows you to be exposed to things you may in fact like,' he added."
The San Jose Mercury News: Friendster Hires New CEO (Registration required)

So much of the rebirth of fresh activity on the Internet involves veterans of the 1990s Internet boom. "Sassa, Friendster's new chief executive, replaces interim CEO Tim Koogle, Yahoo Inc.'s former chief, who took the helm at the company in late March. The move by the pioneering social networking company is something of a Silicon Valley sequel -- with Koogle again playing a leading role. Three years ago, Koogle stepped down as CEO of then-struggling Yahoo and was replaced by prominent Hollywood studio executive Terry Semel, who has since rebuilt the Internet media company and diversified its revenue stream," Reuters said. Koogle will stay on as a board member, the Merc and others reported.

"Sassa, 45, held executive positions at NBC from 1997 through 2003. For three of those years he was president of NBC West Coast, overseeing the development and production of shows like 'The West Wing,' 'Law & Order: Special Victims Unit' and 'Fear Factor.' Prior to that, Sassa spent nine years at Turner Broadcasting System. Shaking off comparisons to Semel, who came to Yahoo after a successful stint as co-chairman and co-CEO of Warner Bros., Sassa said he would be looking at targeted advertising as a revenue model, but would not rule out other prospects. 'I've got some pretty strong ideas' for Friendster, said Sassa."
Reuters: Friendster Taps Former TV Executive As New CEO

CBS MarketWatch has more details on how Sassa came on board. "Sassa was approached by Benchmark Capital's Bob Kagle and Kleiner Perkins' Russ Siegelman for the job about six weeks ago, said Sassa in an interview with CBS MarketWatch," the news outlet said. With the hire, "Friendster appears to be trying to shed its online dating image and evolve into some kind of media company." More on Sassa's plan for the company: "Sassa is keeping mum on the details but said he has ideas about new interactive programming on Friendster based on the networking taking place on the site. Friendster is also defining its initial business model: advertising-backed programming rather than dating-service fees. ... Sassa, however, says he wouldn't rule out subscription services down the road."

The same article noted that Friendster's traffic has been declining, something the publication reported on last week. "Friendster, an online dating service that grew like weeds because of its viral-marketing strategy, has watched its traffic decline pretty steadily ever since it took in millions from blue-chip venture capitalists Kleiner Perkins and Benchmark Capital last fall. Friendster had 1 million unique visitors in the month of April, down from 1.7 million in October 2003, according to comScore Media Metrix," the article said. "It's unclear what Friendster's plans are to get big, but with traffic dwindling, it does raise the question of whether the valuation it received last year was too expensive. At the time, Friendster had no sales to speak of. Consider Tickle, which had considered itself a rival to Friendster, and had $25 million in sales. It was just snapped up by Monster Worldwide for $29 million in cash and $24 million in stock, plus an earnings-based bonus of up to $40 million."
CBS MarketWatch via Investor's Business Daily: Friendster To Name Former NBC Executive As CEO
CBS MarketWatch via Investor's Business Daily: Was Friendster Valuation Too High?

Discovering Friendster

Obviously, with 7 million members, Friendster is nothing new to a lot of people on the Net. But mainstream media seems to be just discovering the site and its rivals. The Cleveland Plain Dealer wrote a feature on the site and other social networking twins on Sunday. An excerpt: "The site's rapid growth soon earned Friendster several new 'friends.' These include social sites MySpace (, MeetUp (, Tribe ( and Orkut (, a network affiliated with Google, and business-oriented networks Ryze and LinkedIn ( Online job giant ( added networking in December, and industry giant Microsoft is working on its own networking product. Joining most sites is free, though premium services can carry a charge, and they are all growing. So, what's driving the online network rush? The largest single reason users cite is communicating with existing friends, says Jupiter Research's [analyst Nate] Elliott. Twenty percent of users network to keep in touch."
Cleveland Plain Dealer: Need A Friend? A Job? Join the Club - Online

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