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Imran Khan
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Table 38: Social Networks Users Are Growing Fast, and User Time Is Growing Even Faster
Y/Y growth in first nine months ’08 vs ’07; select sites
Worldwide US
Users, Y/Y Minutes, Y/Y Users, Y/Y Minutes, Y/Y
Facebook 170.0% 137.5% 44.8% 31.2%
MySpace 9.7% 16.9% 7.8% 23.8%
Orkut 47.1% 14.5% 84.7% 82.1%
Friendster 57.5% 62.1% 32.5% -6.7%
Hi5 66.4% 89.4% 22.6% 33.9%
Bebo 45.6% -29.3% 36.1% -54.6%
Classmates -3.1% 13.7% 5.6% 20.0%
LinkedIn 127.3% 121.8% 170.4% 286.4%
All Social Nets 23.9% 32.1% 9.3% 9.3%
All Internet 14.3% 9.9% 5.6% 4.5%
Source: comScore Networks, J.P. Morgan estimates

Key Sites
Some of the notable social networking sites worldwide include:
• MySpace. Launched August 2003, the site was acquired by News
Corporation in July 2005. MySpace’s user base tends to tilt somewhat
toward teens and is more US-based than the audience for any of the other
big six. Also popular with musicians and bands.

• Facebook. Launched February 2004, the site remains independent but in
October 2007 drew a $240M investment from Microsoft, which acquired a
1.6% equity stake. Microsoft also sells ads on Facebook. The site became
open to non-academic users in September 2006.
• Orkut. Launched by Google in January 2004. The site has not taken off
significantly in the US but is quite popular in Brazil as well as India and
Pakistan.
• Friendster. Launched March 2003. In the US, the site has faded somewhat
after being an early leader in the space, but it remains quite popular in
Southeast Asia.
• Bebo. Launched January 2005. The site is popular in the UK and other
English-speaking countries, including Ireland, as well as in Poland. In
4Q’07, it announced a partnership with AOL for integration of instant-
messenger software; two quarters later AOL acquired Bebo for ~$850B.
• Hi5. Launched 2003. The site, though based out of the San Francisco Bay
Area, maintains a base of popularity in Latin America as well as in some
Asian countries.
• Classmates.com. A relative senior citizen in the space, launched in 1995.
The site is now part of United Online, and traffic comes primarily from the
United States. The site reported over four million paying accounts in 3Q’08,
representing 37% Y/Y growth.



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• LinkedIn. Launched 2003. LinkedIn is focused on building professional
networks, and, as such, the site has a somewhat more up-market
demographic and has had somewhat greater success in selling its ad
inventory at higher CPMs. LinkedIn also sells premium memberships.
Technology that Fits a Customer Need
We think much of the success of social networks is attributable, at heart, to the fact
that they provide a superior technology for filling users’ social needs more
efficiently. In our 2008 Consumer survey, nearly 80% of social network users
indicated that they use the sites to keep in touch with friends, and half noted that they
use the sites to reconnect with old friends.
Table 39: Users Overwhelmingly Lean on Social Networks to Keep in Touch
% among users of social network sites; respondents could choose multiple answers
Function % choosing
Keep in touch with friends 78.1%
Reconnect with old friends 50.5%
Share photographs 36.8%
Meet new people 29.9%
Plan social events 17.7%
Share music / find new music 15.2%
Play games 14.2%
Career networking 10.9%
Source: J.P. Morgan Internet Team 2008 Consumer Survey
When it comes to filling this user need, we believe social networks have two key
competitive advantages over alternative methods of keeping in touch:
• News feeds. A news feed is a feature that enables users to see updates on
their friends’ lives, and vice versa, without needing to specifically contact
each other. As any social network user updates his/her profile, those updates
become visible to that user’s circle of friends.
• Built-in spam filter. The promise of email is that anyone can contact you,

and that has also become its curse. Many proposed spam solutions have
focused on attempting to verify that the person contacting you is a friend,
but social networks have a built-in verification system that allows one to
ensure that the bulk of communication is from confirmed friends.
We continue to think social networks are taking away market share from email sites.
Last year, we noted that comScore data suggested Y/Y declines in email usage in
absolute terms. Through the first nine months of 2008, minutes spent on email sites
are growing, though not as quickly as overall Internet usage:


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Table 40: comScore Data Indicates Users Are Spending a Smaller Share of Their Time on Email
Sites
Minutes of usage in millions
Worldwide US
9M’07 9M’08 Y/Y 9M’07 9M’08 Y/Y
Yahoo 43,565 41,842 -4.0% 21,327 21,256 -0.3%
Windows Live Hotmail 33,758 37,970 12.5% 9,425 10,633 12.8%
AOL Email 12,556 11,852 -5.6% 12,177 11,482 -5.7%
Google Gmail 6,351 7,814 23.0% 1,673 2,287 36.7%
All email 110,265 115,154
4.4% 47,025 48,440 3.0%
The growth rate of email category is below industry growth rate, both in US and Worldwide
All Internet 1,160,692 1,275,400

9.9% 310,837 324,762 4.5%
Source: comScore Networks, J.P. Morgan estimates
High User Engagement
Social network sites excel in their ability to keep users on the site: comScore data
indicates that, across the universe of social networking sites, users spend an average
of 7 minutes per day, a number that has grown Y/Y; the trend is headed in the other
direction with email sites, which are drawing less user time.
The effect on email may be partly due to a loss of usage share to social networking
sites. Additionally, part of the impact could be related to the sites’ greater efficiency,
driven by newer, Ajax-based email platforms.
Figure 42: Average Time per User Is Growing on Social Networking Sites and Shrinking for Email
Average minutes spent on site, per user per day
6.9
6.7
6.2
7.1
0.0
2.0
4.0
6.0
8.0
All email sites All Social Network sites
9M'07 9M'08

Source: comScore Networks, J.P. Morgan estimates
Space Remains Volatile
The social networking space remains quite volatile, suggesting other winners may
emerge, and some current leaders may fade. Of the 220+ social networking sites
ranked by comScore with worldwide time spent data from both 3Q’07 and 3Q’08,
sites that grew usage Y/Y outnumbered those where usage shrank by a ratio of 4:3 –

a surprisingly large number of decliners in a space where total minutes were up 39%
Y/Y in the quarter.



74
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Imran Khan
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Figure 43: Not Everyone’s Winning: in the US, Slightly More Decliners than Advancers
Sites with Y/Y declines in total time spent in 3Q’08, among sites with data in both years
0
25
50
75
100
125
US Worldwide
Time on site down Y/Y Time on site up Y/Y

Source: comScore Networks, J.P. Morgan estimates
Classmates-style Sites Gain in Popularity in Eastern Europe
ComScore data suggests that some of the biggest gainers in the space were sites that
operate on the Classmates metaphor: as sites that help users track down their former
school friends.
Such sites appeared to do particularly well in Eastern Europe, with Poland’s Nasza-
klasa.pl (“our class”) and Russia’s odnoklasniki.ru (“classmates”) seeing multi-fold

usage increases; comScore estimates 3Q’08 worldwide time spent at the two sites
was up almost 40x and 5x Y/Y, respectively.
In the U.S., where the Classmates model is more mature, the classmates.com site
nevertheless appears to be ramping paid usage nicely, with 37% Y/Y growth in
3Q’08 to over 4 million paid accounts.
Survey Results: Older Users Remain on the Sidelines
Our November 2008 proprietary survey of consumers’ Internet usage patterns
reinforced the idea that social networking sites remain primarily the province of
younger users. 90% of users aged 18-25 reported visiting a social networking site at
least once a month, while only 35% of users 42 or older went to such sites. The
results nevertheless represented an increase from the results of our 2007 survey,
when only a quarter of users 42 or older reported visiting social networking sites.


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Imran Khan
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Figure 44: Younger Users More Likely to Visit Social Network Sites
% of users, in each age group, that reported visiting a social networking site at least once per month
90%
74%
62%
49%
41%
23%
0%

20%
40%
60%
80%
100%
18-25 26-33 34-41 42-49 50-57 58+
Age

Source: J.P. Morgan Internet Team 2008 Consumer Survey
The age distribution tilts even more heavily to the younger segment due to different
usage patterns. Even among the relatively smaller number of older users who
reported visiting social networking sites, the majority visited them very occasionally.
Among respondents aged 18-33, on the other hand, a third of those who said they
visited social networking sites reported visiting once a day or more.
Figure 45: Younger Users Tend to Be Heavy Users; Older Users More Likely to Check in
Occasionally
% among those who report visiting social networking sites
14%
34%
45%
9%
73%
5%
0%
20%
40%
60%
80%
1-4 times a month More than 30 times a month
18-33 34-49 50+


Source: J.P. Morgan Internet Team 2008 Consumer Survey
Further, we note that our survey did not include users younger than 18, an age group
that, on the whole, tends to be a very heavy user of social networking sites.
Privacy Concerns Overblown
Many social networking sites, especially Facebook, have faced public criticism for
their use of user information. Whether or not these criticisms have merit, from an
operational standpoint we believe concerns about privacy are unlikely to hamper the
growth of sites. We think history suggests that users are willing to give up
incremental information in exchange for features they find useful.
Additionally, we think the history of the rollout of news feeds on Facebook is
extremely instructive: In September 2006, when the feature was first introduced, it
was met with an uproar from users who cited concerns about privacy. In response,