SM: Social networks are becoming the voice of a generation.
RY: Another thing to think about is that people are fundamentally social. What is happening online is a reflection of social behavior in the real world. Sites like ours just enhancing natural behavior.
SM: Where are you in terms of revenue? A general range is fine.
RY: We don’t talk about the actual financials. We brought the company to profitability in October of 2004 and ran it profitably through 2007 when raised capital.
SM: Why did you raise capital?
RY: To enable expansion. We were investing in the business based on profits anticipated in the next 90 days. It was not a long-term view. I believe that social networks will become the top sites in every country. We are already in that position in a several markets. To continue to develop social networking correctly we want to invest strategically and not be held back by short-term financial limitations. In our case, raising capital corresponded with opportunity.
SM: How much did you raise?
RY: We accepted $35 million last year. We raised $20 million in equity and $15 million in debt.
SM: Was Mohr Davidow the only investor?
RY: Yes. Mohr Davidow was the venture investor.
SM: I know you have started the platform strategy with that $20 million. Was there substantial infrastructure investment you decided to invest in?
RY: Not necessarily more than what we were doing prior. We are now opening up multiple data centers. Initially we had one data center; we now have three and will probably open a fourth. That was not initially the plan, although the capital makes it easier to accomplish the inevitable sooner rather than later.
SM: Since photo sharing is such a huge piece of what you offer, doesn’t that put demand on storage capabilities? I imagine 50 million users have a lot of photos.
RY: Fortunately, storage costs go down exponentially.
SM: Do you limit the size of files?
RY: Yes, we control the size of the photo when a user is uploading it. Beyond that we do nothing else.
SM: Where are you in terms of your platform strategy?
RY: We joined Google’s OpenSocial initiative last year and just launched our platform in the beginning of April. It has been phenomenally successful – we see 1 million installs a day. We have over 400 different applications on the platform and it has received rave reviews from developers who have been pleased because we provided them with viral channels to help them get their applications out to hi5 users. Additionally, a number of things we developed in OpenSocial will get rolled into the standard.
SM: You said there were 400 applications on your platform. What are those applications, and can you tell me about some of the top ones?
RY: The top applications typically gravitate towards communication, interaction, and self expression. Most of these applications most are simply fun. An example of this is SuperFive. We have a feature on the site called ‘fives’ where you can give someone a five to say they are happy, cool, athletic or whatever it may be. SuperFives are an expansion of that. There are some music applications which have been done really well and which allow users to select their favorite artists and place them on their profile.
There are other applications such as the Verb. It allows users to pick a verb and pick a friend that a user will apply that verb to. “I want to have coffee with ________” and the user picks one of their hi5 friends. It is simply way of playing. What is interesting about platforms in general is that they enable creativity, at least that is what we have seen.