SM: A lot of rep firms have a reputation for having very high commissions, often upwards of 60%. Are your rep firms requiring commissions that high?
RY: No, they are not. It is a volume and scale business. Compared to what it would cost us to build and hold our own sales force, as a percentage of revenue, I think we get close to those levels. That is especially true as we scale bigger. It becomes competitive. It is as good as what the next rep firm is willing to offer.
SM: Are your demographics teen driven?
RY: That is a really interesting area which I have been looking into. I am fascinated not only by who uses social networks today but directionally, looking 10 to 15 years into the future, who will be using social networks. Today the audience skews young. The 15-24 demographic is the largest audience. There is also significant representation in the 25-34 segment as well. After that it drops off.
It is very interesting to compare the growth in the 15-24 demographic in various markets. One data point is a comparison between us, Hotmail and Yahoo! Mail. Between March 2007 and April 2008 we grew 81% in Mexico as measured by unique visits. In comparison, Hotmail grew 4% and Yahoo! Mail declined.
When evaluating hi5 popularity as a percentage of usage days, we remain very strong. On average, people in Mexico go to the web 12 times a month. We account for 47% of those visits. This correlates to another metric, time spent online. An average user in Mexico will spend 33 minutes on the web, and 37% of that time is on hi5.
Directionally these metrics tell me two things. First, social networks and specifically hi5 are becoming the means of personal communications. People are still using email for communication which is transactional in nature. Personal communication, keeping in touch and the “hear is what I did last weekend” conversations, are moving to social networks.
Second, in Mexico we have the metrics to support this although we believe it is true for all of the other markets as well, it appears hi5 is the driving reason people to come back to the web. The number of times they return to the web in a month, and the percentage of the time spent on hi5 during those return visits, tells us that we are a key reason people in many areas use the Internet.
SM: Traditionally I would say that email is the key reason people use the web, but if personal communications are coming to social networks then what you say makes sense.
RY: Your initial question was about age. What I see happening over time is that the 15-24 demographic will one day become the 25-34 demographic, and when they do they are going to continue to communicate using hi5. Social Networking today looks like a young phenomena. Over time it is going to become increasingly widespread.