Benchmark Capital, the venture capital fund that backs Irish pay-TV group Setanta, has joined the race to find the next MySpace.com by making a $15m (£8m) investment in Bebo, the British online networking site.
Online networking businesses, where young people post blogs, set up home pages and meet the like-minded, are attracting serious investors and established media companies. News Corporation saw enough potential in the business model to acquire MySpace.com for $580m last year. Community sites, which tend to attract older audiences, have also become targets, with US media group Viacom buying iVillage for $600m. In Britain, ITV acknowledged the movement of audience eyes from TV screen to PC monitor by acquiring Friends Reunited for £170m.
Bebo is threatening to overtake MySpace.com as the most popular online networking site in Britain. Bebo was the third most popular Internet search term in April, with MySpace ranked 24th, according to figures from Hitwise UK, which predicted that Bebo would overtake the News Corp business by September. MySpace remains the number one networking site in Britain, with a 12.2% share of visits, ahead of Bebo's 10.3%. Benchmark is investing $15m in Bebo for an undisclosed stake that will make it the second largest shareholder in the company, behind Michael and Xochi Birch, the married couple who launched Bebo only eight months ago.
Barry Maloney, general partner at Benchmark, said networking sites were leading the second phase of the Internet boom: "We think there is a whole new phase coming round and we are trying to pick the next Yahoo!"
Bebo will use the funding to open a London office and expand its US team, with Mr Maloney vowing to "get after MySpace" in its biggest market. Underpinning the growth of sites such as Bebo, he added, is an explosion in user-generated content, from blogs to home videos.
"User-generated content is creating all these online communities. It is a huge market for online advertisers to exploit, particularly in terms of the profile of the users."
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