I know I am about the bring the wrath of the rest of the world down upon me, but what struck me yesterday in speaking with hi5, the social networking service, is how it has pursued the international market as a niche strategy.
In the early days of the service, the company execs decided deliberately to be open to folks outside the U.S. and even offer the service in other languages. This is very different from services, such as MySpace, which would limit certain domain addresses or slow down the service for certain domain addresses, according to an early VC investor at Redpoint. Why? Because the traffic was expensive and the U.S. online ad market dwarfs the rest of the world.
hi5 made the bet that overtime it would be able to attract advertisers and that has paid off. With 28 million unique visitors last month, the service isn't as big as MySpace. But it is profitable and it's benefiting from the phenomenon of social networking services rocketing quickly into the top 100 sites in markets around the world, and attracting advertisers. While the markets aren't as big, says hi5 founder Ramu Yalamanchi, the growth is subtantial. Around 80% of its traffic is from outside the U.S., though the strongest ad markets for it are still in the U.S, the U.K. and Canada, he says.
Over time, in aggregate as these markets continue to grow, this stops being a niche market. But even in the U.S. with one of the most mature and biggest ad market, it has been a struggle for social networks to attract advertising, though they are figuring it out now. But as Yalamanchi pointed out, what really helped hi5 speed up the time it takes to bring in advertisers is the fact that social networks did jump so quickly into the top 100 lists around the world.