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Is social networking company MySpace really more valuable than Facebook, just because it has more traffic in the large, lucrative U.S. market?

No, not really.

Yet that’s the argument Techcrunch makes, in a piece that argues MySpace has the edge because advertisers spend more money online in the U.S. than in most other countries. Each U.S. user is more “valuable” than, say, a user in India or Canada, Techcrunch argues, because advertisers spend a lot less on each online user in those countries. So while Facebook may have surpassed MySpace abroad in overall usership numbers, MySpace is still more valuable, Techcrunch asserts (see the chart at left, for Techcrunch’s results).

It’s important to acknowledge, as Techcrunch does, that markets are unequal, and so a look at simple user numbers isn’t good enough when trying to put a value on companies. However, there are big flaws with Techcrunch’s analysis, even if the point about market ad dollars is a solid one.

The problem is that it focuses only one aspect of inequality: national markets. There are many other aspects of inequality. One is the type of user.

1. TYPE OF USER MATTERS

There is strong evidence Facebook users enjoy higher income levels than those of MySpace because Facebook started among those who attended top universities. Advertisers may be more willing to target Facebook’s users than MySpace’s users. And in so doing, they may spend more money on Facebook, which makes Facebook more valuable. VentureBeat’s Eric Eldon wrote about this recently and provided other reasons why Facebook’s network is more valuable, everything equal.

2. FUTURE MATTERS

Another flaw in the Techcrunch analysis is that it’s static. It looks at statistics today and locks the social networks into a value based on those stats, even though there’s evidence Facebook is growing more quickly than MySpace — and even in markets where advertisers spend more per user than in the U.S. For example, Facebook has surpassed MySpace in Australia (as Andrew Chen points out), where advertisers spend $148 per user, more than U.S.’ $132 per user, according to Comscore and PricewaterhouseCoopers data. Any assessment of value needs to take into consideration future worth. Any Wall Street investor would tell you that.

3. MARKET POSITIONING, PROFITABILITY, INTERACTION AND OTHER THINGS MATTER

Indeed, Wall Street takes these and other factors seriously when valuing companies. Wall Street will value a social network like LinkedIn much higher than other larger networks, even though LinkedIn’s reach is smaller, for example. That’s because LinkedIn’s users are more professionally focused than those on other networks frequented by teenagers (such as Bebo). Techcrunch mentions the LinkedIn case as a “caveat,” however I’d argue it’s fundamental. For new media companies, Wall Street regularly looks at data such as “revenue, “EBITA,” “growth rate” and “market position” (whether you’re first, second or lower in market share), all of which are ignored by a mere look at a country’s ad market size. LinkedIn has long said it is profitable and making considerable revenue (it says it will have $100 million in revenue this year). Compare that to networks a lot larger in reach that aren’t profitable and not making half that revenue.

Bebo is mentioned by Techcrunch as an example of a company valued lower per user than Facebook. However, Techcrunch’s analysis doesn’t explain why. There’s a reason Bebo is valued lower: Namely, its users offer less value to advertisers.

It’s also pretty well accepted that only the top five or so players in any given market really matter. The leading player, by market share, is usually assigned a higher value “multiple” than the second place player (this premium can be 50 percent or higher). The second player in turn is awarded a higher multiple than the third, and so on. Below No. 5, the multiples drop significantly. That’s because the branding and other network effects provided by being a leading player give the company advantage over time. This factor may or may not affect MySpace and Facebook values (the confusion about their relative ranking would suggest that MySpace does not yet deserve a higher multiple, given our points No. 1 and No. 2 above). However, it does mean that Techcrunch’s point system for the lower players doesn’t really make much sense.

There are so many other things that need to be taken into account, too, such as user engagement, how much time users spend on the site, etc. All these are different across networks.

4. CONCLUSION: FACEBOOK’s VALUE MAY MATCH, OR EVEN EXCEED, THE VALUE OF MYSPACE

So where does this leave us? I’d argue that Facebook’s higher income users in the U.S. offer it a decent premium per user relative to MySpace. There’s no convincing evidence to suggest that MySpace is more valuable than Facebook. MySpace has more revenue than Facebook, but it is a lot more mature (has been around longer) than Facebook, and its parent company (News Corp.) is a giant media company that has had more time to try to monetize it. The jury is still out.

As YouTube grows, some estimate it’s making up to $200 million this year — The revenue number comes from a couple estimates reviewed by Erick Schonfeld at Techcrunch, where he looks at how the site’s increasing dominance (see comScore graphs, below) may translate to money. Schonfeld calculates that YouTube is making at least $80 million revenue (not profit) based on some of its more prominent pieces ad inventory; the $200 million number comes from Forbes. I haven’t heard of a big video site anywhere in the world that’s profitable. Shoot me an email at eric (at) venturebeat (dot) com if you have.

Are managers leaving Bebo — Now that the stocks have been vesting in all or in part from the social network purchased in March by AOL for $850 million, people are heading for the door. The founders have already cashed out completely and are leaving. Angel Gambino, head of the company’s efforts to attract musicians and record labels is also leaving, reports CNET.

VC’s face longest IPO drought in five years – This is the second month in a row where no venture-backed private company has become public. More on VentureWire (subscription required).

Another streaming music promotion — Rock band Radiohead is streaming a 30-song greatest hits album Radiohead: The Best Of, and the band’s entire music video collection before the physical copies go on sale. Radiohead has been experimenting with offering its music for free on the web, Imeem is one of the more popular music sites for bands to do it. Streaming isn’t completely free, though, as you have to buy a song in order to get a copy you can play in iTunes or other music players.

Printed travel guides, by David Sifry — The Technorati founder and current chairman of its board of directors has been working on a new startup. Basically, the site lets you print out a travel guide for a particular area, customized to your interests — your interests being how you answer a set of questions you have to answer upon signing up. Huh. Scoble takes it for a test run, here.

Not one Y Combinator company has been backed by a Massachusetts investor — Harvard company Facebook rather famously moved out West, and took funding from Silicon Valley investors over Boston ones. That was a few years ago, but the trend continues with small startups at seed-stage fund Y Combinator, which incubates companies in Cambridge, Mass. and Silicon Valley. “There have been three cases where a Boston VC was talking to one of our companies, and they had the sandwich ripped right out of their hands” Y Combinator co-founder Paul Graham tells The Boston Globe. “The Boston VCs were so slow and timid.”

Retiro Venture Partners: Two classic venture capitalists are apparently back in the business — Mohr Davidow Ventures co-founder Larry Mohr and Western Technology Investment’s Sal Gutierrez have saddled up and are riding again with $18.2 million so far, according to a filing discovered by PEHub.

Clouds are gathering over Silicon Valley’s consumer internet companies. The sale of social networking company Bebo (our coverage) comes at a time when private investors are changing their tune. They’re no longer pumping money into start-ups at the same huge valuations they were doing last year.

Until January, life was groovy as an internet start-up. Over the past 18 months, hedge funds and other large investors eagerly swooped in and invest hordes of cash into consumer internet companies that showed growth in users — start-ups like Slide, Ning and Zillow. Many of these start-ups were making next to no real revenue at all. But the hedge funds were so flush with cash, they aggressively set the pricing of deals, bidding up the valuations of private companies — expecting revenues would come later. They effectively shut out venture capitalists from investing. For example, companies like Slide and Ning drew backers like T Rowe Price and Legg Mason, which injected tens of millions of dollars at valuations in the several hundreds of millions (our coverage of Slide and coverage of Ning, respectively), far outbidding more cost-conscious venture firms.

However, since January, interest from a key group of investors, the hedge funds, has evaporated — almost overnight. With the economy tottering and the credit crunch hitting home, hedge funds such as Artis (which set off the hedge fund binge in the first place, when it backed YouTube, showing hedge funds could make money from start-ups), Galleon and Integral, have shut their faucets. These firms have many of their assets in public stocks, and with stocks declining, they’re reluctant to look at anything that is more than a year way from having a clear shot at going public — meaning few Internet companies in Silicon Valley.

Case in point: Meebo, the site that lets people use a single sign-on to IM across different platforms. It’s got user traction, but its no where close to going public, and has minimal revenues. That company has been on the road trying to raise $20 million, we’ve been told, but it hasn’t drawn the inflated valuation offers of yesterday.

(By the way, we reported earlier about the rush by other start-ups to go out and raise cash before things got ugly; turns out, they were smart.)

Meantime, other large investors, such as T Rowe Price, AllianceBernstein and Legg Mason, which place huge amounts of money (some of the manage hundred of billions of dollars, if not trillions) in the initial public offerings, have also tightened their habits. They haven’t turned away from private companies, but they’re only backing companies close to going public, two years out or less. They backed Slide and Ning because those companies are run by seasoned entrepreneurs. Going forward, with markets the way they are, they won’t be backing any more Slides or Nings, as those companies are still very early. Allen & Co, the New York investment bank, initially acted as a broker for some of these bigger investment companies, hooking them up to Silicon Valley deals, but we’re being told it is having trouble drumming up interest these days.

That’s not to say that a company like Meebo is in trouble. Venture capitalists are still eager to back companies with traction, and some of them learned that downturns are the best time to invest in private companies — precisely because valuations come down, and they know they’ll get a better return when markets improve. Meebo raised money last year, and it is still seeing solid growth in its userbase, with some 29 million unique visitors last month across its networks. It will likely raise cash soon, but it probably won’t be at the stratospheric levels of 2007. Meebo’s Seth Sternberg declined to comment on his fund-raising plans.

Updated with Comscore data, at the bottom of the article

So AOL bought Bebo earlier today, but what did it really buy? A lot of traffic in the UK and in former British Commonwealth countries like New Zealand, but not so much in the US.

(See our earlier story for a lot more background on the deal.)

But Bebo’s traffic seems to be generally leveling off, along with traffic at market leaders Facebook and MySpace. Perhaps all of the large social networks have fully tapped their core audiences and aren’t creating reasons for others to join? Remember that smaller, more narrowly focused social networks are still growing fast, at least in the US, according to analytics firm Compete (our coverage).

Here are the latest traffic numbers on Bebo from web analytics firm Hitwise. Graphs first, bulleted data points second.

• Bebo ranked 4th among a custom category of 55 social networks, after MySpace, Facebook and MyYearbook for Feb-08, receiving 1.15% of all US visits to the category.
• MySpace’s share of US Internet visits was 67 times larger compared with Bebo, and Facebook’s share of US Internet visits (among all categories) was 11 time that of Bebo in Feb-08.
• Bebo’s share of US Internet visits is down year on year. Share of US Internet visits (among All Categories) to Bebo were down 23% last week and down 22% in Feb-08.
• The average time spent on Bebo in Feb-08, was 30 minutes and 26 seconds, more than both MySpace (30m, 7s) and Facebook (21m, 0s). The average time spent on the site is flat year-over-year; MySpace is slightly down and Facebook is up 69%.
• 22.15% of US visits to Bebo last week came from MySpace.
• Of www.bebo.com’s total upstream traffic in Feb-08, 17.37% consisted of new visitors and 82.63% consisted of returning visitors.
• In the UK, Bebo is the most searched-for brand (ahead of eBay and Facebook) and has enormous brand equity.

Update: Comscore’s take on Bebo:

• In January 2008, Bebo had 22.4 million unique visitors worldwide, with visitors averaging more than 3 hours and 30 minutes on the site during the month.
• In February 2008, Bebo had 4.8 million unique U.S. visitors, with visitors averaging 1 hour and 40 minutes on the site during the month.
• In January 2008, 60 percent of Bebo’s traffic came from Europe, followed by North America with 22 percent and Asia-Pacific with 16 percent.
• In January 2008, there were 11.4 million unique visitors from the United Kingdom to Bebo, representing the largest proportion of the site’s worldwide traffic.

Updated with more information about deal terms, below. See our latest story on Bebo traffic stats, here.

AOL has announced that it has bought social network Bebo for $850 million in cash. It’s easy to be skeptical and say that this is an also-ran internet conglomerate buying a second-tier social network. But AOL has been trying hard to buy and merge its way into relevancy — and Bebo is most certainly relevant and could be a good fit with AOL’s other efforts.

First, some background. Last December, we reported that the social network had hired investment bank Allen & Co., either to help it sell itself or to raise another round of funding. Then, Bebo was adamant that “there is no truth” to any acquisition rumors. But Bebo was keeping that option on the table. In fact, AOL and Bebo have been in talks for the last five months. Also, with this deal, investor Balderton Capital made back nine times its investment in less than two years, doing quite well for itself. More on that in a moment.

So here’s how the acquisition could make sense: San Francisco- and London-based Bebo is a respectable social network. The site has 40 million total (not monthly active) users, and they spend an average of 33 minutes per day on the site, Bebo claims; Comscore says it has 22 million unique monthly visitors. The site is far smaller than market leaders Facebook or MySpace, but it has executed well on multiple fronts.

For starters, it provides ample security features for its mostly teenage user base — something Facebook and MySpace have had more trouble with.

Bebo has also gone out of its way to work with large media companies and third-party developers.

Last year, it introduced its “Open Media” platform, designed to let a traditional media company — like AOL-Time Warner’s Warner Bros. movie studio — run its own content within Bebo, using its own media player and making money from its own advertising (our coverage).

Bebo was also the first large social network after Facebook to launch a functional developer platform for third-party applications. It licensed Facebook’s own platform, but redesigned it to be interoperable with Open Social applications (our coverage). Third parties like virtual world Gaia Online have recently seen their applications gain traction within Bebo (our coverage).

Now, Bebo will be the “the cornerstone” of AOL’s online strategy — although details are still vague on that front. AOL points out that between Bebo and its instant messaging services AIM and ICQ, it reaches around 80 million users (I assume that’s total users, the companies aren’t clear on that point). Somehow, AOL plans to circulate users from Bebo to its network, and use its “scale to grow Bebo’s audience.” PaidContent has more details from a conference call on the deal this morning.

AOL, meanwhile, has been laying off thousands to try to refocus its organization. It has already made nearly $1 billion in online advertising acquisitions alone, and it even finally revamped AIM to be a sort of platform (our coverage). The company claims its far-flung — some might say piecemeal — web network has been seeing five consecutive months of page view growth. It has articulated a strategy of building a lot more sites, which we thought sounded like quantity over quality (our coverage). For example, AOL is planning to launch 17 international web sites and expects to expand to 30 countries by the end of this year.

Bebo has also said that it plans to launch localized versions in five countries — the two companies say Bebo will feature prominently in AOL’s launch strategy going forward. So maybe Bebo will be the glue that binds AOL together, although I’d love to see specific examples of how that will resonate with users.

The dealmakers are pictured in the image above. From left to right: Randy Falco, Chairman and CEO of AOL, Joanna Shields, President of Bebo, and Ron Grant, President and COO of AOL (photo via Business Wire).

Bebo’s gutsy moves, and its financial windfall

Here’s some context around Bebo’s decision to hire Allen & Co. last fall. There’s evidence that interest is waning from large hedge funds to pump more money into consumer companies now that the economy is flattening or even in contraction, and new sources of advertising could run dry.

But Bebo did well to hang in there as long as it did. Less than two years ago, Benchmark Capital’s European fund, now called Balderton Capital, and some smaller investors gave $15 million to Bebo, at a valuation after the investment (post-money) of $98 million, VentureBeat has confirmed. It owned a 15.7 stake in Bebo, and with the company valued at $850 million, Balderton earns about nine times what it invested in Bebo. It takes home about $140 million.

It also showed how holding out can be a great benefit even for a third-place player like Bebo. MySpace, the market leader, in terms of number of users, sold for $580 million, suggesting it sold too early.

Bebo is the latest example of a big, scary bet by venture capitalists on a consumer internet company that shows significant traction by adding users, but which isn’t making a lot of money — and where investors pump money into them at huge valuations of between $50 million and $100 million pre-money. Other examples include Photobucket (backed by Trinity), and others that haven’t sold or otherwise returned a profit yet, including Facebook (backed by Accel), Flixster (backed by Lightspeed) and Slide (backed by Founders Fund and T. Rowe Price).

Update: Kara Swisher has more on Bebo’s revenue. She says:

According to the several sources who were privy to Bebo’s financials … Bebo’s revenues for 2006 were only $7 million with $3 million in EBITDA (earnings before interest, taxes, depreciation and amortization). In 2007, the results are still small, with $20 million in revenues and $5 million in EBITDA.

Using 2007 results, that means AOL paid a handsome 42.5 times revenues and an incredible 160 times EBITDA….

Projecting outward, the company estimated–remember, these are not actual numbers, but a best guess by Bebo execs–it would have $50 million in revenue and $10 million in EBITDA in 2008; $117 million in revenue and $48 million in revenue in 2009 and $193 million in revenue and $92 million in EBITDA in 2010.

Some other early investors in Bebo tried to encourage the company to sell last year, scared that Facebook was growing so quickly that Bebo might be left in the dust. However, we’re told by sources that Balderton’s Barry Maloney advised the company to stay the course and hold out for a better offer.

The other notable trait about the company is the husband-wife team. Like the couples that led Cisco and VMWare, Bebo’s team of Xochi and Michael Birch (pictured left) proved they could execute as great entrepreneurs, even if many VCs stay away from backing family-oriented companies. The two were always focused on the product and making it the strongest possible, iterating quickly to make it better. Bebo early on differentiated itself by becoming a safer place for kids to network — more aggressively focusing on security and shunning any trace of pornography. Its user base was always a little younger than the other networks, and its safer atmosphere helped it gain favor among parents. The Birch’s are serial entrepreneurs, however, and are likely to head out from AOL in short order.

Matt Marshall contributed to this article.

1. Bebo’s developer platform now open to all
2. Facebook to let you hide applications on your profile page
3. Top Israeli web companies to tour Silicon Valley
4. Fewer IPOs in Europe this past year
5. Satisfaction, a site where customers can review companies, growing fast, to offer API
6. Vast.com, white label search company, buys Edgeio asset Adaptive Real Estate

Bebo’s developer platform now open to all – Bebo’s platform was announced last month, with more than 35 of launch partners including Rockyou and Gaia Online. Now San Francisco-based social network has opened the platform up to all developers. Information for developers here; a list of applications here. Earlier this week, I looked at how Gaia is gaining new traffic through its Bebo application.

Facebook to let you hide applications on your profile page — Apparently, enough people have complained about the proliferation of third-party applications on Facebook profiles that the company needs to set limits. It will soon introduce a “profile clean-up” tool, that will let you put apps you don’t use into an “extended portion” of your profile that others can view at the bottom of your profile. The tool will alert you to unused apps, similar to how a computer will alert you to unused desktop icons. It will recommend that you keep key profile features, like your Wall, as well as your twelve most favored applications. How long before Bebo offers the same feature, I wonder?

Top Israeli web companies to tour Silicon Valley — Fifteen interesting Israeli companies will be touring Silicon Valley, February 4-7. They’re being sponsored by the California Israel Chamber of Commerce and were chosen from among 90 applicants. VC Cafe has more information about the companies here.

Fewer IPOs in Europe this past year — 38 European venture-backed companies completed IPOs worth 893 million Euros, according to Dow Jones VentureSource — down from 89 companies and 1.7 billion Euros in 2006. Some causes, according to the report: Fears of recession and the credit crunch. The good news: The median amount raised via IPO was 15.8 million Euros, the highest in six years. The median pre-valuation for the companies was 59.2 million Euros, the highest since 2000.

Satisfaction, a site where customers can review companies, is growing fast — Both its number of users and traffic are doubling each month, says chief executive Thor Muller who also — full disclosure — designed VentureBeat’s site. Satisfaction is also planning to release an application programming interface, so companies with forums on Satisfaction can embed discussions them on their own sites.

Vast.com, white label search company, buys Edgeio asset Adaptive Real Estate — Online classified service Edgeio sold off most of its other assets to Looksmart for $280,000 after it went out of business last month. Vast.com is based in San Francisco, and operates vertical search based on specific sources, including classified ads.

Social networks like Facebook and Bebo currently limit users and third-party developers from fully exporting most user data to other sites. However, there are a number of applications that are using these company’s social networking platforms to share data across sites, grow and even make money.

Virtual world Gaia Online, for example, recently introduced an application for Bebo that is now one of the social network’s most popular.

The trend of cross-site applications will pick up steam as social networks and other companies, including Facebook and Google, work to figure out more complete ways of sharing data.

The Gaia application, called Gaia OMG, lets Bebo users, mostly teenagers, sign in to their Gaia accounts while on Bebo, then interact with other Gaia users within the Gaia Bebo application — it’s a miniature, limited version of what you can do on the Gaia home site (see screenshot).

It launched alongside Bebo’s third-party developer platform last month. Now, the company says Bebo has gone from being the 430th largest traffic referrer to Gaia, to within the top ten.

This is easily monetizable traffic for the virtual world. Gaia users on Bebo must go to the Gaia home site in order to buy virtual goods, such as clothing for your Gaia avatar. Gaia currently has three million monthly users, and Bebo claims more than 40 million total users — and the two companies share a teenage audience — so the app is a clearly great market fit.

Other applications are also taking advantage of the Bebo developer platform, which closely mirrors Facebook’s. Bunchball, for example, offers Flash-based games that lets Facebook and Bebo users play each other from within either site. It tells us it averages more than 20,000 games played per day on Facebook, with around 10,000 daily active users. On Bebo, the company averages around 12,000 games played per day, with around 6,000 daily active users. See screenshot, below:

More than 150,000 games between Facebook and Bebo users have been played since the company launched its application on Bebo. Bunchball also integrates with other sites, such as Piczo and other sites, and says more than one million games have been played on it in the last thirty days. For more, see Mark Hendrickson’s write-up.

There are other interesting examples of cross-site applications emerging, such as Facebook application OutSync, which I first saw mentioned on Dare Obajanjo’s blog. It’s actually a combination Facebook-Windows application that shows you the pictures of Facebook friends who email you, within Outlook. More interestingly, it syncs with Windows mobile through your Exchange server or ActiveSync, so you can see photos of your friends during calls or mobile emails. It is compatible with Windows XP and Server 2003, and requires Outlook 2003 and 2007.

Social network Bebo has just announced that its users have installed third-party applications 4,250,409 times since the site launched its developer platform last week.

This install number is significant, as it shows Bebo users want these applications nearly as much as Facebook users have. It also shows that applications developers on Facebook can expand beyond their Facebook audiences.

For sake of comparison, the most popular applications on Facebook grew to millions of users within a couple weeks of that sites platform launch on May 24. (See our earlier coverage of companies like iLike and RockYou.)

“Install” refers to each instance in which a user adds an application to their profile–such as adding a box to show their favorite music clips.

Measuring installs is a less stringent measure of popularity than Facebook’s current method, which calculates the percentage of people using an application on any given day (from the total number who’ve installed that application).

Bebo has developed its own developer platform to be Facebook’s, so many of Bebo’s 35 current application partners simply took their Facebook applications to Bebo. Unlike Facebook, Bebo has carefully restricted its platform to these partners and isn’t yet open to every interested developer. It will be after this initial phase, the company tells us.

The San Francisco company is also part of a rival developer platform effort called OpenSocial, which is led by Google. OpenSocial is still a work in progress, although it has some applications live on some social networks already, such as iLike on Hi5, as of yesterday.

The larger question, of course, is how much these applications are worth, even if they get big and span social networks.

That question is no doubt on Bebo’s mind. It has begun working with a bank, purportedly to help it raise more money–not to sell (our coverage).

Bebo applications range from simple boxes on a user profile that display music clips or a daily quote, to multiplayer games. One of the more interesting examples is Gaia OMG, an instant messaging application created by teen virtual world Gaia Online. You log into Gaia OMG within Bebo, using Gaia ID, then you can instant message with other Gaia and Bebo users and earn points for buying virtual goods in Gaia (a virtual hat for your Gaia avatar, for example).

Launch partners included NBC Universal, CBS, NBA, Yahoo!, The Gap, Flixster, Gaia Online, RockYou, Slide, BeFunky, iLike, WidgetBox, Wallop and more.

Social network Bebo recently hired a bank to help sell itself, we were told by a source. However, the San Francisco company responded to a request for comment, saying it hired the bank to help it “potentially” raise another round of funding.

Hiring a bank for financing suggests it wants to raise a significant amount of funding, probably from private equity firms, hedge funds, or other late-stage investors. Bebo’s competitors have deep pockets: Myspace is owned by News Corp., while Facebook recently took $300 million, including $240 million from Microsoft (our coverage).

Our source is somebody closely connected to the merger and acquisition department of a large internet company. However, Bebo says “there is no truth” to word of a sale.

This is the second tip this week that we’ve gotten about a popular consumer web site bringing in a bank. On Monday, we reported social news site Digg brought in the bank Allen & Company.

Bebo is clearly valuable, whatever its plans. It is a well-run, well-designed and most importantly a large social network that has managed to keep growing despite competition from larger rivals. Bebo had 4.5 million unique monthly US visitors in October, nearly double a year ago, according to Comscore, and it has a large market share in other countries.

Bebo’s typical users are in their teens and early twenties — big users of social networks, as the latest report from the Pew Internet Project shows. The company claims to have 12 million active users in the UK and Ireland, with more than 40 million total users around the world (here). Comscore puts Bebo’s worldwide unique users for October at 21 million, although that number doesn’t include anyone under 15.

(We recently ran a Q&A with Jim Scheinman, the former Bebo vice president of business development and sales, who has just become an entrepreneur-in-residence at venture firm Charles River Ventures.)

Among Bebo’s efforts, it is working with Google, Myspace, and other social networks on Open Social, a software developer platform designed to let third party applications run on any of their sites. Even though that effort is not yet ready, Bebo has not sat still. It has launched a developer platform that’s basically a licensed version of Facebook’s developer platform (our coverage). Facebook is not part of OpenSocial, making Bebo the largest alternative social network where Facebook application developers can run their existing applications.

Bebo lets large media companies do things like run their own video players in the site, featuring their own content and advertising (our coverage). Yesterday, Bebo announced a “wellbeing” platform to help organizations share mental and physical health with Bebo users. Both services target the company’s young user base.

As in Digg’s case, there have been rumors of a Bebo sale for a long time.

A hot rumor in May had Yahoo trying to buy Bebo for $1 billion. August brought the rumor of a purchase by Viacom, including word that the company is looking for a sale “north of a billion.” Company co-founder Michael Birch says he gets purchase offers at least every couple of weeks. We’ve been hearing about rumors of a sale since last year, although the company’s purchase price has kept going up.

Even if Bebo doesn’t plan to sell, there are many large, established media companies without a strong presence on the internet, that may be getting more desperate to buy their way in.

News Corp isn’t satisfied with Myspace. It has also been trying to buy business social network LinkedIn. Microsoft, meanwhile, has paid the $240 million and formed a strategic relationship with Facebook, for a large $15 billion valuation. Google has Orkut, a network popular in Brazil and India, plus its OpenSocial effort as well as its own experiments with advertising on applications within social networks.

Besides Viacom, there are plenty of other large, aging media conglomerates that don’t a social network. Disney, for example, is reportedly looking to buy up consumer internet companies in the coming months.

Updated

Social network Bebo has taken a page from Facebook. It has launched its own, full-blown developer platform that, like Facebook’s, gives third-party developers deeper access to its user data.

In fact, Facebook worked directly with Bebo on its platform to ensure that Facebook applications can be easily ported over to Bebo without developers having to re-write much code.

UPDATE: This is part of a larger Facebook effort to make its platform compatible with other social networks.

Bebo, which claims 40 million total users worldwide, has in turn promised to keep pace with Facebook — it will continue developing its platform to match any new features on Facebook’s platform.

The closeness of the two companies is surprising, given that Bebo is also allied with Google, whose OpenSocial development platform, rivals Facebook’s.

But Facebook and Bebo are working together because, apparently, they see themselves as providing users with somewhat distinct services. Bebo sees itself as a place for teenage self-expression while Facebook sees itself as a network that reflects its users’ real-world relationships.

Facebook’s platform is also more immediately valuable to Bebo: It has been live, and used intensively by thousands of third-party developers since it launched in May, while OpenSocial’s still struggling to ready itself for prime time. See our earlier coverage.

If Bebo really has created a unique place for teen self-expression, then developers will see teen-focused applications become relatively more popular on Bebo than on other social networks’ new platforms, such as Hi5’s and Friendster’s.

“Using Facebook is like hanging out in a wine bar,” Bebo cofounder Michael Birch (pictured above with wife and cofounder, Xochi) told me earlier this year, referring to Facebook’s carefully austere site design and its overall preppie image. Going off that analogy, Bebo is more like a karaoke club for high school kids.

Bebo has planned its launch partners around its target demographic. For example, teen virtual world Gaia Online has created “Gaia OMG,” an application that lets Gaia users access the site while inside Bebo.

Of course, it’s hard to tell how distinct Bebo is to its users. Every social network, including Facebook and Myspace, offers online photo albums, video uploads and other avenues for self-expression.

To promote its teen-media image, Bebo has already gone as far as funding user-created content. It has also tried to get large media companies involved — and comfortable having their material shared and commented on by Bebo users. Its “Open Media” platform lets media companies syndicate videos, music and other content for free, using their own video players and selling their own advertising.

The overlap between Bebo and Facebook leads to other interesting opportunities for developers. The two companies’ platforms let developers build applications that interoperate between the two sites. One example: A Facebook game application developed by Bunchball, will now let users play each other across Bebo and Facebook.

Bebo and rivals like Friendster, are also setting a trend — they are making their platforms compatible with both Facebook’s platform standards and Google’s OpenSocial standards.

Friendster and Bebo are joining LinkedIn as the latest large social networks to throw open their web sites to outside developers.

Like Facebook, and a recent effort led by Google to do something similar with its “OpenSocial” project, these sites are letting third parties build applications for their pages. By recruiting other developers, the social networks are hoping to stimulate a barrage of activity — letting developers access data about users to create helpful services.

This, in turn, is expected to bring new advertising and subscription opportunities back to the networks.

Facebook, and now LinkedIn, Friendster and Bebo have each created a richer set of application programming interfaces (APIs) than offered by OpenSocial. OpenSocial, announced last month, is by many accounts a work in progress.

The value of any of these social networking platforms are open to question. Results have also been mixed for Facebook’s platform,.

Fewer than one hundred Facebook applications are even earning their developers a decent living, from what we’ve heard in the past. The results aren’t due to lack of effort on the part of developers: There are nearly 11,000 Facebook applications today.

Of course, applications designed to entertain, such as iLike’s music fan applications or RockYou’s Superwall, have managed to get millions of Facebook users, with hundreds of thousands using the application each day. Those companies are figuring out how to make money, and claim some success, although they haven’t revealed revenue numbers.

Business-focused application have not been a hit with Facebook users, as far as we know — not even something simple, like a group to-do list. But maybe work-related applications aren’t a good fit with Facebook, which has its roots as a social diversion for college students.

On Monday, business social network LinkedIn began testing that idea. It announced a platform (our coverage) built around its set of data about your business relationships, that other business-focused companies may want to access. Business Week, for example, has already built an application that shows you how you’re connected to people and companies in the publication’s stories. Data-sharing has long been part of LinkedIn’s strategy. Note: You can already pay to put your LinkedIn data in your Plaxo or Salesforce account.

On Tuesday, Friendster introduced more features for its developer platform, which launched late October (our coverage), including a directory of more than 180 third-party applications. Friendster’s platform is also a work in progress. For example, it apparently doesn’t enable voice connections on third party applications, although VoIP companies have had widgets on the site for years.

Today, Bebo will launch its own developer platform, as was mentioned in a couple blogs yesterday. From what our sources tell us, it will be very similar to Facebook’s platform, with a markup language and structure so Facebook developers can easily port their applications to its site. It is designed to integrate with OpenSocial as the latter’s development catches up.

Bebo has developed its own focus: distribution deals with large media companies, and entertainment features aimed at teenagers.

Separately, Bebo has already launched its “Open Media” platform (our coverage), a set of pre-built applications designed to give large media companies an inside track for distributing their copyrighted audio and video wares.

Where does this leave OpenSocial and its long list of partners? Google has put some serious brains on improving it, including Graham Spencer, the chief technology officer of JotSpot before Google bought it. JotSpot itself was designed to be an “application wiki” that allowed users to both select pre-existing JotSpot applications, such as a simple calendar or task-tracker, or build their own on top of it.

There are opportunities for many different types of companies to take advantage of the newly-available relationships between people present in these social network. How much those opportunities are worth is the next question.

Tomorrow, I’ll be moderating a panel on how to turn these apps into businesses, at an open house put on by Social Media in Palo Alto, California (more on its Facebook group, here ).
[With a hat tip to Nick O'Neill.]

Bebo, a large social network that’s especially popular in the UK, has launched a way for large media companies to deliver their videos directly within the site.

The social network will let media companies use their own video player technology to present videos to Bebo’s users, and let those companies keep all the revenue from ads within their videos.

The service is called Open Media, and it includes a recommendation feature that shows users what videos their friends like. It also includes “channels” where companies can offer only their own videos, that include forums, blogs, photos and other features for Bebo users to talk about what they’re watching.

Compared to competitors, Bebo is establishing clearer rules around distribution and monetization, and forging stronger relationships with specific big-media partners.

It already offers a book “authors” section and a music section. Video syndication is another part of the same strategy — it brings in lots of compelling material that keeps people on the Bebo site, letting them sell ads that are relevant to what people are already interacting with see.

We recently interviewed a departing Bebo co-founder, who emphasized the value of advertising to users on social networks.

Bebo claims to have more than 40 million users worldwide, although its not clear how many of them are active per month. Bebo users spend 40 minutes on the site each day, according to Comscore.

The San Francisco-based company has already signed up a long list of big name partners, including MTV, ESPN, BBC, CBS, Yahoo! and others as well as startup video sites such as Crackle and Ustream.

On Myspace, videos are typically distributed through YouTube video player widgets or Myspace’s own video player. On Facebook, videos are distributed through the company’s own video application, or other third-party applications. Neither has made a point of cutting deals with specific companies to build features designed for them. They could, of course. But Facebook has chosen to market its developer platform as a place where any developer can launch a successful application, whether the developer is an individual, a large company, or even Facebook.

Notably, Bebo — along with Myspace and many other social networks — is a member of the Google-led Open Social project, lets developers build applications that can be implemented easily across social networks. This means video applications for OpenSocial may be introduced to the site which compete with the media companies that are offering videos through Open Media.

Media partners can join Open Media on their own. For partners that don’t have a video player or video advertising sales team, Bebo will offer its own services.

Jim Scheinman, one of three founders of Bebo, is leaving the company he helped start to become an Entrepreneur in Residence at the VC firm, Charles River Ventures. We talked with him to discuss that decision, his days at Friendster, his plans for the future and, of course, Facebook.

VB: What was it about this opportunity that made you decide to leave Bebo?

JS: I’m an early-stage entrepreneur at heart and the time was right for me to look to the next opportunity in the start-up world. It’s always hard leaving something that you’ve started, especially when the business is doing as great as Bebo is, but sometimes when a special opportunity presents itself, you’ve got to go for it. I suppose it’s the risk-taker in me helping make this decision.

VB: Why Charles River Ventures?

JS: Out of the many opportunities I had to evaluate, I am delighted to have chosen CRV because it’s one of the top firms in the Valley and nationwide, especially in the consumer Internet and social networking space. The CRV team is a group of very smart, successful and great people and they’re definitely seeing the top deals in the consumer internet and social networking space.

VB: What do you see yourself doing there?
JS: I’ll be helping uncover new investments in the consumer Internet, social networking and social media sectors, while working with the firm’s existing portfolio companies and evaluating opportunities for my own next start-up venture.

VB: Can you tell me a bit about what you learned in your time at Friendster?

JS: For me, it basically came down to failed execution on the technology side — we had millions of Friendster members begging us to get the site working faster so they could log in and spend hours social networking with their friends. I remember coming in to the office for months reading thousands of customer service emails telling us that if we didn’t get our site working better soon, they’d be ‘forced to join’ a new social networking site that had just launched called MySpace…the rest is history. To be fair to Friendster’s technology team at the time, they were on the forefront of many new scaling and database issues that web sites simply hadn’t had to deal with prior to Friendster. As is often the case, the early pioneer made critical mistakes that enabled later entrants to the market, MySpace, Facebook & Bebo to learn and excel. As a postscript to the story, it’s interesting to note that Kent Lindstrom (CEO of Friendster) and the rest of the team have done an outstanding job righting that ship.

VB: What did you learn at Bebo?

JS: I learned many great things at Bebo that I unfortunately can’t share in detail. I learned from some of the best viral marketing experts. I learned a great deal more on the technology side and also was very involved with many critical product decisions. I was excited to take the notion of “engagement marketing” within social networking sites — something that I thought up at Friendster — to the next level at Bebo. In a nutshell, engagement marketing seeks to turn users into brand advocates. It’s clearly becoming the de facto standard of monetizing social networking. Facebook’s recent announcements about their new social ads is a great endorsement of all the work I’ve done in this space over the past five years and I’m excited to see where Facebook, MySpace and Bebo will continue to take engagement marketing over the coming years.

VB What’s your take on the moves that Facebook has been taking lately?

JS: As far as the valuation goes, Microsoft couldn’t afford to lose another deal to Google and they could afford that price. Whether or not you can say a 1.6 percent stake in the company is enough to extrapolate a true valuation from, they didn’t buy Facebook. They put a relatively much smaller investment in Facebook so they could stay close to them. With that said, I think valuations are still probably below what they should be for what these companies are eventually going to do. As a side note, a little known fact is that when I was at Friendster, I found a small company out of Harvard that we came very close to acquiring, a startup no one had heard of that time, a company named The Facebook. I’ve been an admirer of Zuck and the facebook team for a long time now.

VB: Where do you see social networking going in the next years?

JS: When it comes to social networking, we’re in the third inning: There’s a long way to go. What’s at the core of social networking is a new communication platform. It’s also a huge entertainment platform that’s just beginning to evolve. My belief is that the uber-social networking is over. There are three winners: MySpace, Facebook, and Bebo. But there are new opportunities to have very successful niche social networking sites. I worked at NBCi for many years and saw the same dynamics. Ultimately, there were three portal winners, Yahoo, AOL & MSN and the rest are gone (Excite, Lycos, Go, NBCi…) But there was room for successful niche portals, like iVillage. I also think there are many opportunities around engagement marketing. I go back to what I invented in Friendster, where I created the engagement marketing business model. If you have a very large, engaged audience, you can do things with that audience in a natural, word of mouth way that you can’t do anywhere else on the web. It’s the Holy Grail for online advertising.

VB: Did you develop the engagement marketing concept?

JS: That was me. The first one ever done was with Disney. We did it for Bill Murray’s movie, The Life Aquatic. Bill Murray’s character had his own Friendster profile. We developed it lot more with Bebo and Facebook has now developed it further with their social advertising platform.

VB: So in that sense, is Facebook late to the game?
JS: Sure, you can say they were late to the game, but they weren’t around when Friendster started doing it in 2003. I think they’ve smartly gotten on the right path with social advertising and I’m not surprised that they’re doing it.

VB: What is it about start-ups that get you riled up?

JS: I love the creation process. I love the notion of thinking of an idea and helping spec a product and working with an engineer to build it over a weekend and go live on the site. And then watching millions of customers engage with that idea and turn it into something of their own. It’s been so exciting to see all the growth at Bebo over the years to become the largest social networking site in the UK, Ireland and New Zealand and the 3^rd largest in the US behind MySpace and Facebook. For my next venture, I would love to meld my desire to create with something that I’m passionate about. That, to me, would be the ultimate start-up…where I could wake up every day and be excited about creating a new venture that will create jobs and hopefully wealth for many employees and at the same time build something that will further society in a very big and positive way.

1) Myspace launches advertising based on user data
2) It’s the social network data that matters, stupid.
3) OpenSocial will be big for marketers who want to connect to social network users
4) Google Trends: searches for Facebook nearly equal to searches for Myspace in the US

Myspace to launch advertising based on user data — Myspace plans to launch a self-service advertising system that includes new targeting technology for placing ads with users that are relevant to their profiles and interests.News Corp.-owned Myspace’s new ad system, called