RealTime IT News

Friendster's VC Hopes Rest on Patent Wishes

Friendster, the social network whose numbers suffered with the rise of MySpace, made $10 million in venture capital this week.

But with MySpace having received $580 million from News Corp. and $900 million more from Google, Friendster might feel like it's missing a zero or two.

Yesterday the company announced $10 million in additional funding from Silicon Valley firms DAG Ventures, Kleiner Perkins Caufield & Byers and Benchmark Capital.

But even Facebook, which isn't anywhere near a MySpace, got at least $25 million in additional VC earlier this year. And that was after rumors of a $750 million acquisition offer.

The truth is that Friendster, despite its early entry onto the social networking scene, is no longer in the same league as MySpace, which holds 82.26 percent of the social networking market as of Aug. 19, according to Web metrics firm Hitwise.

Friendster ranks as the eleventh most-popular social networking site after more popular online meeting grounds, such as Facebook, Xanga, and Yahoo 360.

It owns .39 percent of the market and that's a fall from a year ago when they held almost 1.3 percent.

But it's not for a lack of trying.

Last year, the company announced Friendster 2.0. The site redesign included popular social networking applications, such as a page devoted to real-time updates on friends, customizable profiles and classified ads.

It also enhanced its photo- and video-sharing offerings.

Still, if the Hitwise report is any indication, the social-networking site failed to maintain its relevance with its audience.

And despite Friendster's claims that its audience has grown since the update, its market share has declined.

So why have investors poured more cash into what looks like a relative loser?

Neither Friendster nor any of the VC firms were available for comment by deadline, but the answer could be patents.

While MySpace and Facebook were off collecting big checks and Internet giants such as Yahoo, MSN and AOL scrambled to throw together competitive products, Friendster waited until July 7 of this year for its own big news.

That's when the US Patent Office awarded it a patent titled, "A System, Method and Apparatus for Connecting Users in an Online Computer System Based on Their Relationships within Social Networks."

The patent's title is fairly self-explanatory, but at the time, Friendster was happy to elaborate, saying the patent covers the invention that led to the emergence of widely adopted online social networking systems, according to a statement.

Water-tight patents have meant big money for market-share losers in the past year.

In March, Research in Motion, manufacturer of the popular Blackberry device, paid NTP $612.5 million over alleged patent infringements.

"The patent is the first of many expected to be awarded to Friendster over the next several years," Friendster President Kent Lindstrom said.