A recent report by TechCrunch indicates that first on the scene social network Friendster will most probably be sold by month’s end. While the deal is yet concrete, inside sources have indicated that the company will be sold to an unnamed Asian buyer for at least $100 million.
To say that Friendster’s had a long and winding road might be the understatement of the decade. Founded in 2002, the original social network ruled the internets for a short while, but was quickly taken over by MySpace and Facebook. At least in the U.S. market – as Friendster ended up finding a home in the most unlikely of places, Asia. Currently, while numbers are paltry in the U.S., Friendster enjoys 50 + million users in the Asian market (over half the networks total number of users).
TechCrunch put a valuation of $210 million on Friendster back in July, which doesn’t account for Friendsters refocusing of their monetization strategy which they launched at the end of this past October. Instead of relying on advertising revenues, the social network made the shift to revenues coming from microtransaction purchases. A move that’s apparently been working well for hi5, with an admission that hi5 is now more gaming focused than social networking focused. However, that’s not to say that Friendster doesn’t have the same potential. Especially when you look at where their highest market concentration is, who’s buying them, and what market they’re operating in: Asia.
In hindsight, it looks like this deal has been in the works for quite a long time. Last year, Friendster brought now CEO Richard Kimber on board. Prior to Friendster, Kimber headed up Sales and Operations in the South East Asia region for Google. This past summer, Friendster opened itself up on the ‘for sale’ block, and as stated above, this past October they initiated a major shift in monetization from advertising to microtransaction reliance.
Again, no buyer has been named, but the inside source indicated that China’s Tencent Holdings was amongst the short listed buyers. Facebook also showed interest, but was turned away due to competition and IP issues. My guess is that Facebook could really care less about the actual mechanism of Friendster itself, but would love to get their hands on the 5 U.S. patents that Friendster currently holds with the U.S. Patents and Trademarks Office.