Venture Capital Going to Smaller, International Social Networking Sites

Om Malik over at GigaOM today announced that social network startup has secured $20 million in funding from venture capital firm Mohr Davidow Ventures. The news touched off dialogue and research into the significance of U.S. versus international popularity of social networking sites, and the growth of social networking sites in general.

Based in San Francisco, Hi5 was founded by current CEO Ram Yalamanchi as a social network and matrimonial site geared towards the Indian diaspora. It quickly spread to Kuwait, Tunisia, Romanica, Mongolia, and Portugal while maintaining a strong grip on most of Central America. The site claims 30 million members and 200 million page views a day; big numbers nearly Facebook-like, but garnered with non-English populations. If Hi5 continues to grow in popularity internationally, $20 million is certainly a small investment for the expected massive return.

Similarly to Hi5, Google-owned Orkut has become an extremely popular website on the strength of international use. While it is only the 31st most visited site in the United States, it is the 8th most popular in the world, with large followings in Brazil and India. All this shows that users who limit their analysis of social network popularity to the big names in the United States (MySpace, Facebook) are missing the larger, global picture. This overseas popularity helps to explain the rapidly growing American userbase for such sites.

Indeed, a look at Comscore data for social networking sites shows that Orkut leads MySpace and Facebook in the average pages per visitor per month category (773 to 659 and 529, respectively). Those are pages per visitor per month in the United States. MySpace controls the other key metrics, topping average visits per visitor per month with 23.9. Orkut comes in second with 20.9, followed by Facebook with 19.8.

Clearly, MySpace is not dying anytime soon, as various recent reports would have you believe. On the other hand, the social networking market is not a two-company tango; sites like Orkut and Hi5 are set to make serious inroads among the U.S. audience while cultivating their international popularity. Venture capital firms and the big search engine guns (Google, Yahoo) would do best to remember that.

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