For years, the U.S. company’s dominance in the $10 billion social media industry was limited outside the English-speaking world by local copycats. Those sites are now losing traffic as Facebook’s global reach, games and music drive membership.
Hyves, which like Facebook started in 2004, was overtaken as the biggest Dutch social network in August, with its 7.2 million visitors topped by the U.S. rival’s 7.7 million, according to researcher ComScore Inc. (SCOR) In Germany, the number of users for VZ Netzwerke, formerly known as StudiVZ, more than halved to 8 million in September from a year earlier, while Facebook visitors rose 43 percent.
“Dutch people who want to connect with an international friend, they cannot use my platform,” said Marc de Vries, chief executive officer of Amsterdam-based Hyves. “I’m such a small company in this global network world and I can never compete on an international level.”
Facebook, which has raised $1.5 billion from Goldman Sachs Group Inc. (GS) and Russia’s Digital Sky Technologies, needs to keep the site growing before a possible initial public offering. While Europe’s fragmentation, with almost 50 countries, has helped create sites with local languages, news and discussion forums, the global scale of Facebook makes it increasingly difficult for them to compete.
Facebook’s decision to offer the site in several local languages helped the U.S. network to “be super-local in Europe and now it has just mastered Europe,” said Jan Rezab, CEO of researcher SocialBakers. Facebook started Spanish, German and French versions in 2008 and later added languages such as Russian, Dutch, Danish and Italian.
In Germany, Europe’s biggest economy, the owner of former market leader VZ Netzwerke last month shelved a potential sale or initial public offering for the site amid declining user numbers and worsening financial markets, according to a person with knowledge of the matter.
StudiVZ, an abbreviation for “students’ directory,” was started in 2005 and sold in 2007 to Georg von Holtzbrinck GmbH for 85 million euros ($116 million) following initial success. StudiVZ was renamed VZnet Netzwerke in 2009 and then VZ Netzwerke this year.
Competing With Facebook
Marc, Oliver and Alexander Samwer, three German brothers who run investment fund European Founders, sold a stake in StudiVZ and acquired a holding in Facebook in 2008.
“They will always be more successful from a product point of view and national or regional sites will always have a hard time to compete,” Marc Samwer said in an interview. In 2011, the Samwer brothers sold their Facebook stake to focus on early- stage companies.
Alexandra Kuehte, a VZ Netzwerke spokeswoman, declined to comment on a sale or IPO of the site. VZ Netzwerke aims to lure users with distinctive platforms for students to focus on specific interests. The approach of rivals to “offer everything to everyone” won’t be successful in the long term, she said in an e-mail, adding that management is working on strategic positioning of the site.
Facebook, which has more than 800 million users worldwide, is still trailing some local rivals such as Vkontakte in Russia, Nasza-Klasa.pl in Poland and Draugiem.lv in Latvia.