Category Archives: Main Page

Report: Web 2.0 funding in U.S. slows, except at Facebook

Posted on by

Venture capitalists pumped a record $1.34 billion into 178 so-called Web 2.0 deals in the U.S. in 2007, up nearly 88 percent over amounts invested in 2006 — but social networking company Facebook Inc. accounted for 22 percent of it all.

And according to data unveiled Tuesday by Dow Jones VentureSource at the Web Ventures conference in Redwood City, Calif., deal growth is slowing.

From 2002 to 2006, Web 2.0 deal flow doubled every year, but 2007 only saw deals increase 25 percent to 178 from 143 deals in 2006. Nearly all of this growth happened outside Silicon Valley, the longtime home of Web-related innovation and investment.

“On the surface, the numbers look fine for the Bay Area — $720 million invested in 72 deals — but take Facebook’s $300 million out of the statistics and you see a very different picture,” says Jessica Canning, director of global research for Dow Jones VentureSource. “Web 2.0 deals in the Bay Area actually dropped from 74 deals in 2006 to 69 last year and investments were down 3 percent from the $431 million invested in 2006.”

Palo Alto, Calif.-based Facebook raised $240 million from Redmond, Wash.-based Microsoft Corp. (NASDAQ: MSFT) in a highly publicized corporate round as well as at least $60 million more from individual investors last year. The next-largest Web 2.0 deal was the $44 million first round for Ning, also of Palo Alto, which lets users create their own niche social networks.

Despite these larger deals, Web 2.0 companies still remained a relatively inexpensive investment for venture capitalists. According to the data, the median deal size for these companies reached a record $5 million in 2007, up from $4.1 million in 2006. This is still far behind the overall $7.6 million industry median for a venture capital deal in the U.S. in 2007.

Even so, investors are placing a higher value on Web 2.0 companies. The data shows that in 2007, the median pre-money valuation for a Web 2.0 company reached a new high of $10 million, up from $6 million in 2006. Still, that’s well below the overall $16 million median pre-money valuation seen for venture-backed companies in 2007.

Facebook establishing new privacy controls

Posted on by

PALO ALTO, California: Facebook has announced the introduction of privacy controls that give users of the social-networking site the ability to preserve social distinctions between friends, family and co-workers.

Executives at Facebook said Tuesday here that the changes would allow the site’s more than 67 million users to control what was seen by their friends, and friends of their friends.

The company was founded in 2004 as a social site for students at Harvard University and spread quickly to other colleges and eventually into workplaces. Its popularity stems from how the site conveniently allows users to share details of their lives with selected friends online.

While part of Facebook’s appeal has been the greater degree of privacy controls it offers users compared with other major social-networking sites, the site has also been the target of two major revolts by users in response to new features that many felt exposed previously private information to wider view.

Matt Cohler, vice president for product management at Facebook, said it was seeking to evolve beyond the simple privacy controls originally aimed at relatively homogenous groups of college-age users.

“We have a lot more users, a lot more types of users, a lot more relationships, we have a lot more types of relationships,” Cohler said.

But only 25 percent of current users have bothered to take control of their privacy using Facebook’s personal-information settings, the company said.

The use of Facebook has exploded fivefold over the past year and a half. Two-thirds of its users are outside the United States, compared with about 10 percent 18 months ago, when most members were student age and in the United States.

Facebook members will be able to control access to details about themselves they share on the site at a group-level by creating and managing lists of friends that are granted different levels of access to such information. Users already control what individual friends see on a member’s profile.

The new privacy controls were to be introduced early Wednesday in California, the company said.

The group privacy controls take advantage of “friends lists,” a feature that was introduced in December and helps members organize friends in their network into groups. These private lists allow users to direct messages to selected friends or filter what personal details those groups see. Users can create as many as 100 different “friends lists.”

Late last year, Facebook allowed users to turn off a controversial feature called Beacon that monitors what Web sites they visit. The chief executive, Mark Zuckerberg, apologized for not responding sooner to privacy complaints regarding the feature.

Beacon is a way to keep one’s network of friends on Facebook informed of one’s Web surfing habits. Critics argued that this feature transformed Facebook from a members-only site known for privacy protections into a diary of one’s wider Web activities.