The Hungarian tech community is currently abuzz with the news that T-Online has purchased a local social networking site, IWIW, for EUR 4m. For some here, this feels a bit like the heady exuberance of the dotcom days. In fact, the success of IWIW has already inspired two imitators.
This news will certaintly provide encouragement to local tech entrepreneurs, and may be an important signal that the online ad market is beginning to mature. Unfortunately, for a number of reasons this deal is unlikely to create much in the way of long-term value. All the same, congratulations to Virgo Systems!
The good news is the IWIW deal signals that the Hungarian online ad industry is starting to matter. One reason T-Online paid the money was to acquire the advertising inventory. According to reports, IWIW attracts up to 400,000 visitors each day (although I can’t help wonder if those are actually visitor sessions). Another obvious reason is that T-Online wants to increase the value of their portfolio of websites.
The downside of this deal is that IWIW’s popularity is clearly a bubble. The service is primitive in comparison to international competitors such as LinkedIn and OpenBC (the latter is also available in Hungarian). Once a critical mass of users has connected to each other, there’s not much more for them to do unless T-Online is prepared to invest in expanding the service.
And that’s not likely. T-Online has neither the vision nor the will to further develop IWIW. Nor are there any clear models for commercializing such a service. The most sophisticated competitor, LinkedIn, now provides a number of useful services to job seekers, however the service is not yet profitable. Most notably, Google seems have to have given up development of its social networking service, Orkut.
The local tech community can take pride in the fact that IWIW’s valuation (EUR 4m) isn’t that far off from the sums being invested in similar US services – LinkedIn ($15m), Friendster ($13m), Spoke ($21m) and Tribe ($4.8).
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