Victor Donselaar, a Dutchman living in Helsinki, Finland, finds the social network Facebook useful for staying in touch with new friends and business contacts from across Europe. But when he wants to connect with old buddies from the Netherlands, his social network of choice is strictly homegrown. "In Holland, none of my friends are on Facebook," Donselaar says. Instead, he notes, they're on a popular Dutch site called Hyves.
As U.S. social network growth slows, sites including Facebook and rival News Corp. (NWS)-owned MySpace have shifted their attention overseas. But while these leading Western sites have seen steady adoption in key countries, they've been met with indifference in markets like the Netherlands, where comparable domestic sites are entrenched. International expansion is key to growth for sites that have struggled to make money from users who would rather socialize than click on ads or make purchases from a profile page.
Lost in Translation
Language is one barrier. Facebook and MySpace both introduced many of their foreign-language versions only in the past year, and many translations are still imperfect. But in many cases, the local sites cater to the sensibilities of local cultures in ways that are difficult for the U.S.-headquartered sites to match. "In the U.S., people use social software pretty much the same way nationwide, while different parts of Europe have different uses depending on culture," says Loic Le Meur, a French entrepreneur who moved to Silicon Valley to launch the video-sharing site Seesmic. For example, he says, "Latin-culture countries such as France, Spain, or Italy tend to share and blog a lot, often under their [own] names, while Germanic cultures tend to share more anonymously."
Hyves (its name being a play on the English word "beehives") says it has signed up 7 million Dutch residents, or almost half of the country's population of 16 million, since launching in 2004. On the site, users post photos and videos, customize their personal profiles, and connect with neighbors in nearby provinces. One of the most popular users is Prime Minister Jan Peter Balkenende, who boasts about 150,000 friends and sometimes invites people he meets on the site for a visit to his presidential office.
"The local tone of voice of our Web site is very important," says Hyves co-founder Raymond Spanjar. "Both MySpace and Facebook have been translated into Dutch, but as is usually the case, the translation is rather clinical and doesn't really compare." For example, Facebook's "Wall" feature, a personal guestbook where friends can leave comments, in Dutch is called a "prikboard," the literal translation for bulletin board. By contrast, Hyves created an original name, the "krabbel," for its comparable feature. "It is now a very popular word, and might even be added to the Dutch dictionary," Spanjar says.
Unseating Entrenched Locals
U.S. sites have made little headway in the Netherlands. According to data obtained from comScore (SCOR), Hyves had 5.7 million unique visitors in November, compared with Facebook's 585,000 and MySpace's 566,000. And in October, nine months after MySpace announced a renewed focus on the Netherlands, the Beverly Hills (Calif.)-based site shut its Amsterdam office. MySpace found the landscape competitive and entered the country late, Derek Fehmers, who led MySpace's operations in the region, told a Dutch news outlet.
"Some of these [sites] have a good foothold because it took the American sites a while to get a good local-language version," says Rebecca Jennings, a London-based analyst at Forrester Research (FORR) who has studied the social media habits of European consumers. She says that once a site like Hyves has become the norm in a local community, upstarts "have to provide an incentive for them to move."
MySpace and Facebook, the largest social networks in the world, have differing approaches to infiltrating foreign territory. MySpace has opened 18 overseas offices focused on developing local-language versions in markets with the most moneymaking potential. It also hires native speakers not only to translate the site into other languages, but to publish original content like the online-only series Candy Girls, exclusive to German MySpace users, about four party-hopping, twentysomething girls living in Berlin. "Translating the site is not the most important part," says Travis Katz, MySpace's general manager of international. "We have to ask, 'How do we make sure it reflects the culture?'"
Facebook leaves much of the customization to users themselves, providing tools that let people translate the site into their native tongues. Adopted by users with enthusiasm in many countries, the tools have helped Facebook quickly gain a toehold in some markets. On Mar. 10, about 4,000 Francophiles helped translate the entire site to French from English in 24 hours, a new Facebook record. The Palo Alto (Calif.)-based site also encourages foreign developers to create apps with a local flair. "Facebook Platform has helped us provide a truly local experience to our global user base, by using the expertise and knowledge of local developers," says Javier Olivan, international manager at Facebook. One example: A German developer created an app called Schnick Schnack Schnuck, a local version of rock, paper, scissors.
How Tuenti Targets Advertising
For Zaryn Dentzel, an American entrepreneur living in Spain, as Facebook has become more of a "social operating system" for people in all countries, it has lost some of its power as a meeting point for local communities. So in 2006 he launched the Madrid-based Tuenti, a Spanish-language social network that gives members a limited number of friend invitations. Users handpick close connections, usually best friends from very specific real-world networks, such as college dorms or favorite hangouts, as well as the more general categories, including city of residence or university attended, on which Facebook networks are based.
Since Tuenti launched, Facebook and MySpace have ramped up efforts to add users in Spain. So far, the local site has remained in the lead. In November, it had 5.1 million unique visitors, while Facebook's Spanish-language site had 3.5 million. Still, in recent months Facebook is growing more quickly. It has more than tripled its user base since May, when it had just over 1 million Spanish users. Tuenti doubled over the same period, from 2.5 million.
Eventually, Dentzel says Tuenti may compete in other countries and languages, but for now he's focused on making money from his Spanish base. Already, the myriad local networks on Tuenti are giving Spanish advertisers insight into real-world behavior that can help them tailor ads to specific audiences. A recent ad for a concert targeted at users in a specific geographic area yielded as much as a 40% click-thru rate—much higher than a traditional banner ad on most Web sites, which is usually less than 1%. Building on this strategy, Dentzel hopes to improve on his 2008 revenue of around €600,000 to €700,000 by as much as 10 times this year. Facebook, which doesn't release revenue figures, is understood to have generated 2008 revenue of $250 million to $300 million.
Advertisers Spread Their Bets
When it comes to advertising, country-specific sites lack a key edge held by the major players. Sites like Facebook are able to sell ads from major brands across a broad international platform. "Our global reach gives us a lot of advantage over the local guys on monetization," says MySpace's Katz. "We are a single platform that can support large ad buys in localized languages, but executed from a single point."
That's not keeping major advertisers like Coca-Cola (KO) from flocking to regional sites like Belgium's Netlog, where the beverage maker has around 30,000 "friends" signed up to its "brand page."
Coke also has fan pages on Facebook, of course, reflecting how many advertisers—and users—want to see and be seen on more than one kind of network. "What we'll find is that people will have two or three social networking sites at the same time," says Forester analyst Jennings.
Still, for holdouts in some locales, a local feel is all that a network really needs. Says Evert Bopp, a Dutch user of Hyves, Facebook "has all the bells and whistles that I don't really want."
For more on international social networking sites, see BusinessWeek.com's slide show.