Facebook Scores Euro Funds

The investment, likely to be in the millions, from Germany's Net-savvy Samwer brothers, will boost the social networking site's Europe expansion

Facebook has attracted yet another strategic investor, raising millions of euros to fuel its European expansion, from three German brothers who made their fortune building Internet companies.

The news that Germany's Samwer brothers are Facebook's investor and strategic partner of choice for Europe—first leaked on a German blog on Jan. 15—follows announcements last autumn of a $240 million investment in the social networking site (BusinessWeek.com, 10/25/07) from Microsoft (MSFT) in the U.S., and a $60 million injection from Hong Kong billionaire Li Ka-Shing to fund its Asian expansion. Facebook could not be reached for comment.

The amount the Samwers are investing has not been disclosed but is expected to be in the millions, if not tens of millions of dollars. "The combination of Facebook's technological excellence and our experience in building up successful European Internet companies will make Facebook a huge success in Europe," says Marc Samwer.

A Lot of Catching Up to Do

Facebook is currently the third-ranked social networking site in Europe, behind Bebo and MySpace (NWS); the latter is No. 1 according to market researcher Jupiter Research. It also faces competition from local rivals expanding across Europe, including Belgium's Netlog, which offers social networking in more than a half a dozen European languages. Facebook is strongest in Britain—the largest market for social networking in Europe—where 11% of the population visits social networks weekly, compared to only 7% in the U.S. Other European countries lag behind both the U.S. and Britain, but analysts say they represent a huge opportunity for growth.

To that end, MySpace has launched 28 local sites in the last 20 months in Europe and elsewhere (BusinessWeek.com, 7/10/07) "There is a lot of catching up that Facebook has to do to compete on the local level," says Nick Thomas, a London social networking analyst for Jupiter Research. "That said, the success they have had without localization suggests they have a product that is appealing to Europeans. An investment from European investors who know this market sounds like a good thing."

The Samwer brothers, Alexander, Marc, and Oliver, are among the most successful Internet entrepreneurs and investors in Europe. When all three were still in their twenties they started an online auction company called Alando, that was sold to eBay (EBAY) in 1999 for $54 million. The three then became managing directors of eBay Germany, turning it into the company's largest marketplace outside the U.S.

Patience Pays Off

In 2001 they founded Jamba, a mobile content company, which they sold to VeriSign (VRSN) for $273 million in 2004. Jamba is now majority-controlled by News Corp. (NWS). In 2006 the Samwers established a European Founders Fund with their own fortunes to support and fund early and later stage Internet businesses in the U.S. and Europe. Other U.S. investments made by the Samwers include LinkedIn. The Samwer brothers are helping LinkedIn and several other U.S. companies they invested in expand into Europe.

The Samwers first came in contact with Facebook through one of their European investments. The brothers were early investors in StudiVZ, a Berlin-based European social networking site for students. When StudiVZ was put up for sale about a year ago, Facebook expressed interest. The site was eventually sold to German media group Holtzbrinck for an undisclosed amount, but the Samwers stayed in contact, visiting Facebook on at least one occasion during their frequent trips to Silicon Valley. Their patience now looks to have paid off.