Looking for the EuroMySpace

MySpace may be sucking all the oxygen out of social networking in the US, but in Europe the game’s dominant players have yet to be decided. Dave Keating reports.

Chances are by this point you’ve heard more than you wanted to know about MySpace, the US social networking site bought by Rupert Murdoch’s News Corp. for $580 million last year. Though just a few years ago the social networking scene in the US was filled with many competitors including Friendster and Facebook, MySpace has now practically been declared the winner of the social networking wars. Who could say whether this will last, but the site’s dominance is enough to make any venture capitalist think twice before investing in such a crowded field.

Social networking is definitely a competitive field, but it feels to us that there’s more opportunity in Europe than in the US.

Dennis Atkinson

However this is not the case in Europe, where US social networking sites have for the most part failed to penetrate, and home-grown sites are still jockeying to see who will emerge as the leading favorite. Venture Capitalists looking for the next big thing in this medium might do well to look to the old world for potential candidates.

This week Passado.com, one of Europe’s fastest-growing social-networking sites, successfully raised $13.2 million (€10 million) in a series B financing round led by US-based Tudor Investment and the London division of DFJ ePlanet Ventures.

DFJ has been following this company for awhile, having invested €2 million in the company’s series A round of financing in 2004. The company was founded in 2002 with funding from a small group of angel investors.

“The thing that was attractive to us was that this was in the European context,” says DFJ managing director Dennis Atkinson. “Social networking is definitely a competitive field, but it feels to us that there’s more opportunity in Europe than in the US. The big winners are still to be formed in Europe.”

London-based Passado began as a site for university graduates to keep in touch with one another, but since then the focus has expanded to include networks of work colleagues, childhood friends and even new friends. The site focuses on older consumers, which is a big departure from the youth-focused strategy used by most social networking sites. Passado has more than five million registered users in Germany, Spain and Italy. It has now established a UK site and is aggressively marketing to this audience.

Though the site’s user base may pale on comparison to MySpace’s 70 million registered users, but it is coming up strong to Belgium-based Incrowd, whose Europe-focused social networking sites Facebox, Bingbox, Redbox and Coolbox have a combined user base of 15 million. Other European social networking sites include Habbo Hotel, which combines the online chat concept with The Sims-style visual representations of users, and the popular UK site Bebo, which received a $15.5 million investment from Benchmark Capital in May. In August it was reported that Viacom may be interested in buying the site.

Atkinson says what sets Passado apart is that it is targeting a different audience. “These aren’t kids and teenagers using this site, it’s adults,” says Atkinson. “They have more money to spend, so it’s a better demographic for advertisers. And really this is the demographic that’s starting to use these sites more and more.”

Atkinson adds that they’ve built up a very strong management team since the company’s founding, including the ex-head of product management for Match.com and the former head of CRM for lastminute.com.