updated with valuation

RockYou, the Silicon Valley widget company that lets millions of people post slide-shows on Web sites and play games on platforms like Facebook, has raised $35 million more in a third round of funding.

VentureBeat learned of the news Friday, and confirmed it over the weekend with chief executive Lance Tokuda. The company will issue a press release later this morning.

Doll Capital Management led the round, providing $30 million. The remainder $5 million was provided by existing investors, Sequoia, Partech and Lightspeed. Tokuda said the company may raise more money later, but wouldn’t elaborate. The company has now raised about $48 million in total.

Tokuda said the company raised the cash to keep expanding. The round follows the $50 million round of cash raised recently by competitor Slide at a whopping $500 million valuation. I’m told RockYou raised this round of money at a valuation lower than Slide’s, but I’m not sure how much lower [Update: We’re hearing the valuation was set in the $200 million to $230 million range]. RockYou had set out to raise money at a valuation of $400 million, though VentureBeat reported earlier that it was having trouble doing so on clean terms.

That’s a bit of a blow to Rockyou, since by all accounts it is competing neck and neck with Slide. RockYou says it may have a slight edge: RockYou’s reach stands at 87.5 million users a month, compared to Slide’s 63.7 million, according to traffic measurement company Quantcast.

[Update: While RockYou points to Quantcast, Slide counters by saying those numbers are misleading. Indeed, the numbers game can be confusing. On one hand, Slide says RockYou is an ad network and has added Quantcast pixels on all of its banner ads, including when they’re on other publisher sites. Slide says it is not an ad network, and sells ad only on its own applications. RockYou then counters and says Slide counts some page traffic that isn’t monetizable because it doesn’t carry ads. This semantics game matters, because Slide’s pageviews are twice as large as RockYou’s. Finally, Slide says Quantcast pixels aren’t placed on several of the sites in its network, including MySpace, Orkut, and Hi5.]

That Slide was able to raise money at a higher valuation than Rockyou may come down to two facts: 1) timing; economic woes have set in, and made investors a little more sober, and RockYou was slower to raise money; and 2) Slide’s founder Max Levchin is a veteran entrepreneur, having co-founded PayPal, another very successful company. RockYou’s founders (Tokuda pictured left, co-founder Jia Shen on right), by contrast, are on their first company. Slide, though, insists it deserves a higher valuation, and that Max is not the reason.

I should note that RockYou’s funding included the $1 million invested barely a week ago (reported by VentureBeat). That $1 million was a “bridge” financing to tide the company over until the larger round could be completed, said David Chao partner of DCM. RockYou needed the $1 million urgently to do an unspecified deal, Chao said.

Chao said it was clear from RockYou’s growth in page views, monthly unique users and overall Internet reach that Rockyou may become a top-ten Internet property globally (at least in terms of reach).

RockYou has been building an ad network to let advertisers target users of RockYou’s popular applications on Facebook and other social networks. The Quantcast numbers count traffic to pages that contain widgets where RockYou has the ability to insert advertising.

Chao said that advertising dollars flowing into social network sites have been small so far, but they’re likely to grow over time as advertisers get used to the medium. Already RockYou is making “double-digit” millions of dollars in revenues, he said, referring to this year’s run-rate. Contextual advertising will become popular on Rockyou, as advertisers find that they can target certain demographics, for example the different genders and age groups of users that play RockYou’s various games, Chao said.

Chao said RockYou would likely to build more complex applications over time, which may mean more sophisticated audiences and thus more lucrative advertising.

Tokuda said the company is moving to Redwood City, Calif., this month, from San Mateo, Calif.

VentureBeat's mission is to be a digital town square for technical decision-makers to gain knowledge about transformative enterprise technology and transact. Discover our Briefings.