Social Networking Grows Up and Gets Attention of Big Media

Previously seen as an endeavor for teens, social media isn’t child’s play for big media firms like CBS, Ebay and Fox Interactive Media.

By Hilary Coolidge, Experience Design Consultant, and Rob Ehlert, Senior Technical Architect, Molecular

Over the past few weeks, there has been a tremendous amount of acquisition activity in the social media world – most notably CBS bought Last.fm; Ebay bought StumbleUpon; and Fox Interactive Media bought Photobucket and Flektor.

Why the acquisitions? Similar to News Corporation’s (the parent of Fox Interactive) $580M acquisition of MySpace in 2005, these social media sites provide a social setting for their respective consumer bases. The acquired companies benefit from “the wisdom of crowds” philosophy, whereby the more people that add content, feedback, or links, the richer the experience.

Acquisitions vary between tactical and strategic

CBS’s $280M acquisition of Last.fm is purely strategic in nature. It allows CBS to gain a foothold on the “scrobbling” technology that Last.fm uses to analyze music and create music recommendations to users based on current tastes. One can postulate that it is a small attempt to answer the MySpace acquisition by accessing a social network of music lovers. Further, Last.fm’s venture into video is a bid to try and take some thunder from YouTube with a more music focused publishing core.

Ebay purchased StumbleUpon for $75M — it is a site that “learns what you like and makes better [site] recommendations.” Integrating the technology will help Ebay provide a recommendation engine in its growing purchasing universe.

Most tactically, Fox Interactive’s purchase of PhotoBucket (estimated at approx $250M) and Flektor (estimated at $15M) will stop the acrimony between photo editing and MySpace rules. In the past, MySpace blocked Photobucket’s popular video and slide show posting service, claiming technological issues and that Photobucket supported MySpace users’ inclusion of ads in slide shows. Instead of continuing to work with third-party vendors, Fox decided to purchase the technology in order to better control it, and spread its capabilities to other businesses they own that can benefit from the technology.

The rest of the market

In addition to the ever growing number of social networking sites that are out there, there are also quite a bit of product/services firms that are in the business of building, selling software for, and hosting these social networking sites. These areas are also experiencing acquisition activity.

In February, Cisco acquired Five Across, a company that builds and hosts social media sites for clients. There are many other small firms still out there; such as Ning, PeopleAggregator, GoingOn Networks, Prospero, Pringo, Pluck, etc. We don’t think there will a single winner.

As companies start to find the value in using social networking to link their consumers with their brand, we will start to see additional technology players acquiring these smaller social networking firms.

Facebook is next

With Facebook opening up of the back end and adding the possibilities of endless widgetization, where does that leave us? We anticipate that within a few months, its 23 year old Harvard founders will be smiling.