Facebook rakes in Web 2.0's big bucks

Facebook raked in nearly a quarter of all US investment in Web 2.0 in 2007. Of US$1.34 billion (£670 million) poured into the technology, 22 percent went to the leading social networking site.

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Facebook raked in nearly a quarter of all US investment in Web 2.0 in 2007. Of US$1.34 billion (£670 million) poured into the technology, 22 percent went to the leading social networking site.

The 2007 investment total reported by Dow Jones VentureSource this week is described as an all-time high after several years of meteoric growth. In fact, it almost doubled the previous year's total.

However, the researchers warned that investments seem to be levelling off. This could be a "make-or-break year" for many internet firms relying on advertising, because of a slumping economy and slowing click-through rates for online adverts, VentureSource said.

Biggest Web 2.0 investments in 2007

  1. Facebook: $240 million on 25 Oct
  2. Facebook: $60 million on 3 Dec
  3. Ning: $44 million on 11 July
  4. Metaweb Technologies: $42.5 million on 31 Dec
  5. Zillow: $30 million in Sep
  6. Metacafe: $30 million on 16 Aug
  7. n2N Commerce: $30 million on 31 Jan
  8. Veoh Networks: $25 million on 31 Aug
  9. MyStrands: $25 million on 11 April
  10. Reunion.com: $25 million on 21 May

In raw figures, Facebook took in $300 million (£150 million), including $240 million (£120 million) from Microsoft. (VentureSource calls this last deal the year's biggest Web 2.0 venture capital deal, but some industry watchers don't agree, saying the transaction is just one vendor investing in another, and not a true venture deal.)

Coming in a distant second was Ning, a Palo Alto company that lets users create their own niche social networks and which raised $44 million (£22 million) from venture capitalists.

Total investments by dollar has risen heavily during the last five years, from $79 million (£40 millon) in 2003. "From 2002 to 2006, Web 2.0 deal flow doubled every year, but 2007 saw deals increase 25 percent to 178 from 143 deals in 2006," Dow Jones VentureSource reported.

Web 2.0 companies are a good investment for venture capitalists because "they can do so much with so little", research director Jessica Canning of Dow Jones VentureSource added. "A few million dollars and they're not only up and running but attracting eyeballs and advertisers."

Investors can get in on the cheap, relatively speaking. The median investment for Web 2.0 companies in 2007 was $5 million (£2.5 million), less than the country-wide median of $7.6 million (£3.7 million) per venture deal.