Clearly, this is a big win for Socialmedian, which only recently came out of private beta.

But what does this mean for XING? According to XING CEO Lars Hinrichs, Socialmedian promises to make XING's network of business people more successful - by saving them time:

"In business success depends on access to the right information at the right time. Both the speed of information and the sheer volume of data have increased rapidly due to the rise of the internet. Traditional media companies, social media such as blogs, tweets, videos and other user-generated websites now provide daily news, leading to a veritable flood of information. The consequence: Time-strapped professionals are forced to parse through numerous news sources for relevant information and sort, organize, and share stories on their own.

Thanks to socialmedian you can save the little time you have."

As part of the deal, Socialmedian CEO Jason Goldberg will be relocating to the Hamburg, Germany headquarters of XING and serving as VP of the XING Applications Platform. The entire Socialmedian team will become employees of XING, as well.

Terms of the acquisition were not disclosed.

Update, Ed: PaidContent is reporting that "the purchase price was about $4 million in cash and stock (Xing is publicly traded in Germany), and a performance-based earn-out valued at between 0.5-2.5 million Euros payable over three years."

Also see ReadWriteWeb's in-depth comparison of Xing to LinkedIn back in March. At that time we suggested that "the real race for business networking has two horses. LinkedIn is clearly one. The other is not Facebook, but Xing."

Keep your eye on Xing, they've just snapped up an innovative little social news network - and they mean business.

• Even more of my contacts have connected on LinkedIn (even technology conservatives are joining).
• I have used it for recruitment as well as business development, with some success as reported here.
• LinkedIn now provides an RSS feed into my start page, so I can quickly scan what my contacts are doing, adding a touch of serendipity as well as pure curiosity.

My experience on Facebook has been light. Recently Dave McClure invited me to connect on on the site -- o that is not a picture of me kneeling in obeisance to a Valley mover and shaker -- and this experience got me thinking about differences/similarities:

• Similar. Both try to get you to use their messaging. That is such a retrograde step. Why would anybody use a proprietary email system that is limited only to that service? I have occasionally used LinkedIn messaging but only because I had no other alternative. If that person is a genuine contact, then I have their email address, why would I use anything else? One semi-plausible reason is spam control, but Gmail has got that issue pretty well nailed in my opinion.
• Different. Facebook prompts public communication e.g the Wall. That is fun/different I guess. I also assume it gets old fairly quickly. What is the business value? We are talking deals, not dates here. In business this is like online whiteboard services, used for collaboration. Do I need to be on Facebook to do that?

I think the case for Facebook rests on all the cool guys entering the workforce who won't use anything else. So, to reach them you gotta be on Facebook. Is that it? Is Facebook a tool to recruit people coming out of college?

As you may have guessed, I am still of the opinion that LinkedIn is the better tool for business.

What do you think?

LinkedIn's value to users is clear; their value as a business, however, is less clear. But that may be due to the fact that they are a private company and so there is not any hard data to go on. Xing, the European alternative to LinkedIn, is public and recently published their quarterly results:

• Record quarter: Total revenues increased by 91 percent to 7.51 million euros (~$11.6 million)
• EBITDA increased by 500% over Q1/2007
• Number of Premium Members increased by 60 percent within one year to 420,000

Thats pretty impressive. It would be interesting to see the numbers LinkedIn is probably floating around as various unsubstantiated rumors say that they are looking to:

• do an IPO, or,
• sell to News Corp. or somebody else, or,
• raise another round

Which just about covers the strategic options.

USA Today, apparently with a source at LinkedIn, or at least not denied by LinkedIn, says:

"With more than 1 million people joining each month and projected 2008 revenue of $75 million to $100 million, LinkedIn Corp. seems likely to deliver another big payoff for [founder Reid] Hoffman."

That is heady growth, which would make any of the above strategic options viable. But this is a projection. To compare with Xing one would need to see last quarter revenue (about $11.6m for Xing). Take that $11.6m for Xing and multiply by 4 and you get an annual run rate of $46.4m. If they keep up their current 91% growth rate that would put Xing right around where LinkedIn is projecting ($46.4m + 91% = $88.82m). So, as we reported back in March, it is a two horse race for global online business networking. It is possible that Xing has actually got their nose out in front.

As we reported back in December, LinkedIn's key asset is a young and rich demographic (younger than Wall Street Journal, richer than Facebook). That's the key to their business.

What would be most revealing would be the number of paying subscribers. Xing reports that, and Xing is clearly profitable. My concern about LinkedIn as a business is that it is too dependent on advertising.

But then so is Facebook. And the key question asked 6 months ago is will Facebook eat LinkedIn's lunch in the business market or will LinkedIn continue to pull ahead in that key segment. You know what this "suit" thinks (Xing is leading by a whisker, LinkedIn is close behind and looking strong, Facebook just fell at the last jump). What do you think?

Recently I have been using it for headhunting. From talking to both Xing and LinkedIn management, I understand that headhunting is the primary use case - at least as a revenue driver for them.

Which is why good headhunters will always be in business. Even if LinkedIn changes the game for them.

Which it does. But it really changes the game in a not very nice way for Monster and Dice.

This became clear when I spoke to the first headhunter. He is very good at his niche, I have used him with success before. So I was shocked to find he did not know about LinkedIn. I clued him in. He owes me a discount on my next search.

I asked the next headhunter and his response was “it’s awesome, totally changes the game”.

He is right. The reason is that LinkedIn connects me to people who are not looking, but who might be with the right proposition. So I can target not only companies where people may have the right experience but companies where the employees might also be feeling nervous about the future.

That saves me the Monster and Dice fees. Which would only get me the active job seekers.

My proposition to the headhunter who was not using LinkedIn was that he should put his whole proprietary database up on LinkedIn. This was his pride and joy, the accumulated asset from decades in the game. So the idea gave him some agita. But I also said that he could connect to me and I was happy to give him an exclusive on this search. I was not willing to pay the 33% headhunting fee, more like half that (more a “recruiter” than an “executive search” fee). But that would be worth it to me as I would get his contacts as well as his time and experience filtering and closing the right candidate.

This works because the headhunter can set the Connections tab as private. That prevents a client or competitor browsing through his database. They can see his Connections via Search. But transparency is one price to pay. In the end it is only names on LinkedIn, what matters is the quality of the relationship.

I don’t know how headhunters will adapt to LinkedIn. I am not sure if it is wise for them to load in their contacts. I know that would work for me as a client, but our interests are not totally aligned. I do know that they will have to adapt.

I am sure that Monster, Dice and their equivalent will have to work a lot harder to prove their value.

I also know that many companies would love to ban their employees from being on LinkedIn, to avoid them being poached. However I suspect that effort will fail.

In all my use of LinkedIn, I have still not paid them a dime. Which makes me a total cheapskate and ingrate. But I don’t need to pay them to get the value, which is tremendous. So I am still not totally sold on LinkedIn as a business. But that does not matter as I cannot buy their shares. I am totally sold on their value as a service.

LinkedIn recently gave me an RSS feed of events in my network that feeds up to my start-page. So I can read the latest tech news and see who my contacts have been meeting. The latter, being personal to my little corner of the world, is far more interesting. I know you can get that kind of thing with Facebook and FriendFeed (neither of which is for a “suit” like me). But in the business world, this is quite exciting.

Image credit: cosmonautirussi

From the Consumer Perspective

Probably the biggest concern from a consumer perspective about using general social networks for business networking had to do with privacy. When you start adding colleagues or other business contacts, you have to be more careful about what you expose on your profile. But with the addition of new privacy controls last week, Facebook users now have more granular control over who sees what on the site.

Profile information and other shared items -- such as photos -- can now be restricted to user-created groups of friends, to specific people, networks, or "friends-of-friends." Users even have the option of barring specific content from specific users. Though we also noted that they are so inclusive they could potentially be overwhelming for some users, they are also a necessary step in making users feel comfortable using Facebook for professional networking.

Facebook is slowly positioning itself to be a place where both casual and business networking can take place at the same time, which means that rather than maintaining two accounts -- one at Facebook and one at LinkedIn or Xing -- users could stay at Facebook and use the tools they grew accustomed to in college.

From the Business Perspective

The concerns from the business side are a little more complicated for Facebook to deal with. First, there's the issue of security. The photo lapse we reported on earlier this week may seem inconsequential for most business uses, and was apparently fixed once it was discovered, but security issues like that don't make businesses happy about storing data on a site. Another, potentially more serious (from a business use scenario) security issue that was reported recently is a phishing technique that allows users to record some information from private Facebook groups. Though the info it is able to gather was mostly benign, it still highlights the concern that business users might have about Facebook security.

It is important to note that the above concern assumes a business use case for Facebook that is slightly different than the networking going on at LinkedIn. In the above scenario, businesses would actually be utilizing the network at Facebook internally, rather than professionals merely using the site to network on their own time.

However, the larger hurdle to getting businesses and professionals to adopt Facebook as a networking platform is about attention. Unlike LinkedIn or Xing or Plaxo, Facebook is not all about business. First and foremost, Facebook has been about connecting with your friends and having fun, and that will worry business users. Facebook might have potential as a great business networking platform, but it's also a guaranteed timesink.

The Infrastructure

Facebook, of course, already has a huge number of business users, they're just not using Facebook for business. The business networks on Facebook are already enormous. Microsoft's network has 30,000 users, Google has 8,500, Well Fargo has 4,200, The US Army has 74,000, and the list goes on. Even MySpace has 407 users in its Facebook network.

The trick is to get those users to start looking at Facebook as a place for work as well as a place for play, and the way to do that may be to leverage something that LinkedIn doesn't really have: a platform full of eager developer. (Yes, LinkedIn did launch its platform last December, and it does have OpenSocial involvement, but as we've pointed out, so far it has been quite closed and the results have been less than stellar.)

What Facebook should do, is appeal to the companies that these networks -- which have grown organically as employees voluntarily joined Facebook and declared allegiance to this network or that one -- to utilize Facebook for a closed corporate networking environment. Facebook should encourage platform developers to create tools aimed at enriching company networks (or create them in house if need be), and encourage companies to leverage their existing Facebook network as a corporate intranet by installing applications on it.

That's no small task, certainly, but it is plausible. It's not the same route that LinkedIn has taken -- where company networks have grown organically in much the same way that they have on Facebook. But the end result is the same: making people comfortable enough with the network to do business on it.

Conclusion

Facebook has a history of attacking their competitors at their strongest points. MySpace had a strong widget ecosystem, so Facebook launched their application platform which forced MySpace to scramble to do that same. MySpace has strong ties to music and film, so Facebook has recently tried to forge their own (too early to tell if it is working). LinkedIn has a strong stake in business networking, and Facebook has recently been making moves to suggest that they could be laying the groundwork to go after LinkedIn's audience they way they've gone after MySpace's.

What do you think? Could Facebook ever be a place where serious business is done? Or does it pay to maintain two separate network profiles -- one for work and one for play? Let us know in the comments.

Update: According to Webware, Facebook quietly launched a "People You May Know" feature that is basically identical to a popular LinkedIn feature of the same name. Hmmm...

While going after the business networking crowd has never been an objective expressed overtly by the company, it does make sense. As Facebook's core early audience -- college students -- grows up, they'll need a more secure environment to network with colleagues and friends. Facebook is slowly positioning itself to be a place where both casual and business networking can take place at the same time, which means that rather than maintaining two accounts -- one at Facebook and one at LinkedIn or Xing -- users could stay at Facebook and use the tools they grew accustomed to in college.

The new privacy controls will reportedly be integrated with most features on the site, but we wonder if they'll extend to Beacon messages...

Facebook further announced a new chat feature. The chat will be one-to-one, IM-style, and integrated with the inbox (users set "Away" will get messages via the inbox rather than the chat app). The chat application is proprietary -- meaning you won't be able to connect to it via third party clients just yet -- and it won't have API access. Future Jabber integration is a possibility, according to reports. The chat client will be included in the new privacy controls, according to VentureBeat, so you should theoretically be able to restrict who can chat with you based on lists.

Also today, new numbers from comScore indicate that while Facebook still trails MySpace by a hefty margin in the US, globally, the networks are neck-and-neck. In January, Facebook served 100.7 million uniques worldwide, while MySpace received 109.3 million visits. That makes Facebook just 8% smaller in terms of unique visitors worldwide. Facebook is already serving more visitors daily on average than MySpace -- it became the leader in that category in November of last year.

Image from Facebook via CNET.

Xing is interesting because it is a public company. They went public in December 2006 in Germany, raising $55m (at current exchange rates). So their financial data is out in the open for all to see, on their site. As the first Web 2.0 company to go public, this makes Xing very interesting to look at.

Xing’s public currency matters, as it will cost a lot of money to win in Asia - where the growth is and where neither LinkedIn nor Xing are strong today. Markets such as China, Japan and Korea are big but also notoriously tough to crack, requiring persistence and deep pockets as well as smarts.

I spoke to Lars Hinrichs, CEO of Xing, last week and I asked him if the company planned a US listing; his answer was a clear no. He is confident that Xing can raise all the capital they need in Europe - and Sarbanes Oxley regulation was a disincentive. Those two Senators have sure done a lot of good for European and Asian companies, by weakening the US IPO market and therefore the capital raising capability of US companies.

The fact that Xing is a “public market comparable” puts some boundaries around LinkedIn’s valuation. If LinkedIn did an IPO, Xing’s comparables would be pored over by Wall Street analysts. If a big public or private company were to acquire LinkedIn, these same comparables would be used.

I do not have access to LinkedIn financials, so I cannot make a serious estimate of LinkedIn’s value. What we do have are some published numbers on users. On that basis, LinkedIn looks like 4x bigger at 20m vs Xing at 5m. Xing’s market cap today is round $300m, so that would make LinkedIn quite happy at 4 x $300m = $1,200m.

But dig a bit deeper, as investors certainly would, and the numbers are not so clearly in LinkedIn’s favor. How well are both sites monetizing their users? This is where Xing’s early capital constrained history matters. The company was profitable within a few months of starting, a very old-fashioned idea.

Xing provided ReadWriteWeb with some data from Comscore:

Click here for larger image

LinkedIn looks ahead on Total Unique Visitors by a factor of 2.6x. That is a big gap but not unbridgeable and smaller than the 4x headline based on LinkedIn 20m vs Xing 5m users.

But what really jumps out from this data is the much higher engagement of Xing users on all the key measures. On Average Minutes per Visitor Xing at 43.4 is 5.5x LinkedIn’s 7.8.

Engagement matters as it translates to revenue, as long as the company is reasonably smart about monetization. Xing, with their bootstrapped early days, has been unfashionably focussed on revenue. Xing recently released their financials for year ending December 2007. There is a lot of interesting data there for anybody interested in the business of business networking. At around $30m, Xing revenues are still small but on a high growth path - 2x 2006 revenues. Plus their 35% EBITDA margin shows maturity. This is already a cash cow.

The combination of cash cow, about $60m in the bank and a public equity currency gives Xing a sizable war chest. They will need that to win in Asia, as discussed above.

They will also need it to win in America (and other English speaking territories such as UK, Australia and India) and that is where Xing needs to be smart. LinkedIn clearly dominate these markets and English is the global language of business (after my feeble attempts to resurrect my childhood German, Lars Hinrichs was happy to speak in English!). I registered for Xing out of curiosity, it all looks quite good but there is no way I will upload my email addresses and ask all my contacts (80% of whom I already connect to on LinkedIn) to also connect to me on Xing. My contacts would rightly accuse me of spamming them.

Note: the same is almost certainly true when LinkedIn tries getting Xing users in Europe to switch. These businesses are valuable because there are high switching costs.

This is where Xing’s relationship with ZoomInfo is interesting. This could be their back door into the US market. ZoomInfo was an early Web 2.0 success story. I recall when they first came out how quickly they shot up the organic search listings on people searches. They became good enough to break the Google habit; I would often go to ZoomInfo first.

LinkedIn took the wind out of ZoomInfo’s sails. The LinkedIn data is often more accurate and up to date, as users are motivated to update it. ZoomInfo data was based on scraping publicly available data. (I don’t use “scraping” in a pejorative sense, it is a valuable tool and ZoomInfo do it better than most and add some semantic smarts).

On the plus side, ZoomInfo does not require anybody to update their profile. So they get a lot of profiles of people who are not on LinkedIn, the real late adopter majority. In business these are often the baby boomers with bi-focals in the corner office who sign off on the big deals. Valuable people in other words.

To counter-attack, ZoomInfo is moving away from the destination site model to an API driven model. They did this using Mashery. So far they only have two applications listed on their site and guess what, one of them is Xing.

LinkedIn also announced their API, right after Facebook announced their API. However in the US market, where they rule, they face a bit of an Innovator’s Dilemma. Personally I would like news from my network to filter up to some RSS aggregation tool, the rapidly evolving range of information overload coping tools that Marshall writes about. Most busy executives need another destination site to visit as much as (insert favorite dislike here). But LinkedIn makes money on page views. They want apps that encourage me to come to their site more often, not apps that make it easy for me to consume their data wherever I am.

Xing, on the other hand, does not need to play defense in the US market (different story in Germany), so they could, together with ZoomInfo and maybe a big email provider, do a nice end run with an API driven strategy.

This, I must emphasize, is purely my speculation and is not any official Xing strategy as far as I know.

Loic Le Meur, a Frenchman who moved to Silicon Valley, sparked a big debate by telling the world that you need to move to the Valley to go global. I agree with most of what he says - “think global from day one” is my summary - but his conclusion that you have to move to the Valley to do this is increasingly flawed and Xing illustrates why. Why move to the Valley? The same reason Willy Sutton robbed banks - it's where the money is. And, yes, talent flocks to money and the combo of talent and money continues to make the Valley the uber-hub. But follow the money. What happens if the US IPO market remains closed to innovative start-ups? Does the entrepreneur in London move to the Valley for her Series A and B and then return to London for the AIM listing?

• The Turkish population on Facebook is estimated to exceed 2.1 million, which places Turkey just behind the USA, UK, and Canada, and ahead of English-speaking Australia.
• 10 out of the 150 most active applications on Facebook are in non-English languages. 1 is in Spanish, the other 9 are in Turkish.
• There are 6 non-English apps in the first 10 pages of the Recently Popular list - they are all in Turkish.

Further, some of Facebook's fascinating visitor numbers coming out of ComScore and other web metric firms come from the Turkish effect. I had the chance to ask Facebook CEO Mark Zuckerberg about it at the Crunchies event, and he agreed that Turkey was having an effect on Facebook's traffic. This is actually a threat for Facebook. Because if non-English speakers dominate an entire network, it could lead to the alienation of the existing user base, similar to what happened with Orkut in its early days. Honor Gunday, the founder of one the largest social networks in Turkey, Zurna, enviously calls this "Orkutization."

Secondly, this investment in Yonja is not the only success we've heard about lately out of Turkey. As Mike Butcher recalls, cember.net was recently acquired by the European business networking leader Xing. This is actually a rather big move, because while LinkedIn has a very strong position in America, they have zero presence in other locations. LinkedIn might be fast being erased by Xing's global expansion. In a global, connected world, that's not a good sign for LinkedIn. And note that Xing is already a public company. So if LinkedIn delays an exit a little more, it may lose its advantageous position, even in the US. In other words, I'm not as optimistic about LinkedIn as our own Bernard Lunn. A small delay may make us call LinkedIn, LinkedInDust.

Similarly when you take a look at Alexa's ranking of Ning's biggest networks, you see that they are either adult-oriented or Turkish. So Ning is being nourished by Turkish traffic as well.

Last but not least, Turkey's high potential in social networking comes from its very young demographics. The number of young people in Turkey exceeds even the most populated countries in Europe. Moreover, the Internet penetration is quite high, and similar to Brazilians, Turkish people have very social characteristics; Turkey was the 2nd biggest market for Live Messenger, after all.

As for Mike's question, some influential people behind the world's most popular social networks come from Turkey. To name a couple, the founder of Orkut and the project manager of Windows Live are Turkish. So, "what is it about Turkey," is not actually the right type of question, although I can understand Mike, because Turkey is generally still a market in the dark, awaiting more exploration.