Mixi -- Japan's top social network -- goes IPO
In Japan, the hot news is the IPO of Japan's largest social networking site (SNS), Mixi. Launched in February 2004, the site has grown to 5 million members in July, up from just 3.4 million in March. I thought I’d take a closer look at the first real public market valuation of a social networking service in detail, primarily because it provides insight into the operations, valuation, and potential for SNS.
Mixi has forecasted
that revenues to be ¥4.8 billion or US$40.8 million with pretax profit of ¥1.7
billion or US$ 14.4 million. Advertising accounts for 80% of the revenue, with
the rest coming from service fees. In the IPO, it raised US$93 million.
US$18.60 US$ 200 for each user in the network at the IPO price.
A rough back-of-the-envelope
would value MySpace’s 100 million users at
US$1.8 billion US$20 billion and Facebook’s 7.5
million users would be worth $139.5 million US$1.5 billion. As a commentator reports beow, Facebook recently raised a round of financing valuing the company at $500 million pre. Granted, the I’m not taking into
account the multiplicative network value of additional members, so this is
likely undervaluing the value of MySpace’s and Facebook’s audiences.
So how hot is the stock?
The IPO price per share was 1.55 million yen (US$ 13,200) which rose to 3.15
million yen (US$26,800) per share in bidding, doubling the price (Note that
these are unfilled bids as the Japanese stock market doesn’t allow
the first day of an IPO unless buy bids match sell bids).
So watch this stock in the next few days/weeks to see how the market reacts to it. I’ll be looking to see not only the stock price, but also how the company performs in terms of monetizing the users.
Here’s some background on the features that make Mixi unique and successful in Japan:
- Invitation-only participation. Most of the Mixi users I spoke with said that they use Mixi only to connect with their friends. The most used feature – the “diary”. They update their own and frequently check their friends’ diaries. While essentially a blog, many users don’t consider it one, as it’s really only for their friends.
- Anonymous profiles. As a rule, the Japanese don’t
use their real names on their profiles. While this is also often true in North America, I found it interesting that users made it
a point to tell me that they didn’t use their real names. Also, very few of the
Mixi users I spoke with said that they had ever interacted with people they did
not know, the complete opposite of the behavior usually found on MySpace.
- Heavily mobile-based. Several users told me that text messaging updates actually facilitated participation as they were more comfortable writing than engaging in face-to-face conversations.
- Groups. Mixi has over 900,000 groups that users have created, which can in turn be sorted by date created or popularity. This simple sorting creates momentum for the Mixi groups, versus the static organization of groups on MySpace.
- Structure. Unlike MySpace, Mixi is highly structured with minimal ability to change the layout. The users I spoke with liked the structure, as it created certainty about how users were to interact with each other.
Update: Several users reminded me of a key feature -- the ability to see exactly who has viewed the page, allowing them to keep track of their social connections.
additional background on Mixi, here are a couple of good resources: Metropolis
Magazine’s article “In
the Mix” a great, detailed overview of how social networking is used in Japan. Pete
Cashmore at Mashable
also gives a nice overview of Mixi while News.com has a quick
Update: Newsweek also has a short write-up.