NETTING IT OUT

This is our fourth semi-annual update of companies and products in the online community and social networking space. New to this coverage are INgage Networks and Ramius Corporation. They join 10 previously covered companies: Demand Media (formerly covered as Pluck), Ingeniux, Jive Software, Lithium Technologies, LiveWorld, Mzinga, Powered, RightNow Technologies (formerly covered as HiveLive), Small World Labs, and Telligent Systems. For these organizations, we look at how they fared during the first half of 2010 with regard to customer acquisition, product lines, service offerings, pricing, business and technology partnerships, financial performance, and organizational structure.

Results for the first half of 2010 were solid across the board. Many companies saw steady, if not increased, customer acquisition. A few target markets shifted and expanded. There were two rounds of capital investment (both Series C), five acquisitions, two headquarter relocations, and a whopping 50 new partnerships, signifying the importance of these relationships as sales channels and technology developers and integrators. Hiring was very strong, including at the executive level (which we haven’t seen before to this degree), and remains promising, with over 100 open positions across the 12 companies.

Product development continued at a rapid pace, with new releases from every company. While new features and functionality were wide ranging, there was a focus on crowdsourcing and mobile applications. Integration with the social Web (Facebook, Flickr, Twitter, and so on) continued strongly, as did development of analytics offerings.

ONLINE COMMUNITY PLATFORMS: FIRST HALF CALENDAR YEAR 2010

Watch List

It remains no easy task to decide which companies and products to include and which not to. The admittedly informal considerations we look for are companies and products that (1) do—or can—support large-scale online customer communities, and (2) have a track record of doing so.

Even with their similarities, the companies we cover here are not a homogeneous group. For sure, there is some overlap in their target markets, growth strategies, partner collaboration, R&D philosophy, pricing models, service offerings, and so on. But differences abound in each of these areas as well, as we discuss below.

The same is true of the platforms themselves. While they all provide more or less similar core components for enabling customer communities and social networks (e.g., forums, blogs, search, profile management, administrative tools, widgets and APIs, etc.), their technology architectures and feature sets vary, as do the built-in workflows (e.g., for moderation) and the degrees of access and control they give clients (e.g., for customization). Most are provided on-demand, while others are designed for on-premise use. And some integrate out of the box with third-party applications, while others require custom integration.

In a less rigorous way, we do look at many other vendors and platforms that support online communities and social networks that are not covered in this report. These include wikis (e.g., Atlassian, Socialtext, and Wetpaint), collaboration-based applications (e.g., IBM Lotus Connections, Igloo Software, and Microsoft SharePoint), social networking systems (e.g., Groupsites and Ning), and others. We may include some of these companies and products in future updates, and we look to your perspective on which of these—or other—companies are of interest.

New to the watch list are Florida-based INgage Networks and Ottawa-based Ramius Corporation. Awareness, Bayspire, and Leverage Software, which were included in previous reports, are not participating this time. Passenger and Spigit will be covered in our upcoming report on crowdsourcing vendors. Pluck, which was a subsidiary of Demand Media, is now more formally part of the company. And HiveLive was acquired by RightNow Technologies, so we’re now following that company (which is also being covered by Patricia Seybold Group senior analyst Mitch Kramer, for their customer service products).

This report covers the following 12 companies:

• Demand Media (www.demandmedia.com) – formerly Pluck
• Ingeniux (www.ingeniux.com)
• INgage Networks (www.ingagenetworks.com) – formerly Neighborhood America
• Jive Software (www.jivesoftware.com)
• Lithium Technologies (www.lithium.com)
• LiveWorld (www.liveworld.com)
• Mzinga (www.mzinga.com)
• Powered (www.powered.com)
• Ramius Corporation (www.ramius.net)
• RightNow Technologies (www.rightnow.com) – formerly HiveLive
• Small World Labs (www.smallworldlabs.com)
• Telligent Systems (www.telligent.com)

Observations and Trends

We have noted a few trends within the industry and across the companies covered in this report.

1. CUSTOMER ACQUISITION. The 12 companies in this report acquired more than 500 new clients in the first half of 2010. (Some, such as Demand Media and RightNow Technologies, have product lines that extend beyond their community platforms; only new customers of social media and community products are included in the number above.) How many more than 500 is uncertain, as not all the companies provide these numbers.

In terms of raw numbers (though not necessarily revenue), new client accounts were led by Jive Software and Telligent Systems. Apples-to-apples comparisons aren’t particular fruitful, however, as some companies, such as LiveWorld and Powered, intentionally land fewer, high-value accounts. From the information we have been able to gather, there’s a pretty large spectrum of average deal sizes among these companies, ranging from $40,000 to $250,000 per year.

2. MARKET FOCUS. An increased degree of market specificity is emerging in the industry, as companies seek to differentiate themselves and strengthen their presence in the sectors where they’ve found success. For example:

• INgage Networks and Ingeniux have a foothold in the higher learning and government sectors.
• Jive Software, Mzinga, and Telligent Systems have well developed offerings for internal/employee communities as well as for external/customer communities.
• The sweet spots for Lithium Technologies and RightNow Technologies are in the peer-to-peer support and social CRM space.
• Demand Media has had a lot of traction with media and publishing companies.
• Ramius Corporation and Small World Labs have platforms well suited to associations and member networks.
• LiveWorld and Powered—which are more like social marketing agencies with complementary community platforms than technology vendors with social know-how—are focused on major consumer brands.

The lines drawn above are not rigid; all the companies we cover span multiple markets and industry segments, and are successful in many of them. But market differentiation continues, since previous years would have seen even larger overlap.

3. STRATEGIC, FINANCIAL, AND ORGANIZATIONAL CHANGES.

• Name Changes and Acquisitions. Neighborhood America is now INgage Networks. Pluck is now Demand Media (and Demand Media is currently going through an IPO process). HiveLive was acquired by RightNow Technologies (albeit in 2H-2009).
• Acquiring Others. Two companies acquired social media monitoring vendors: Jive Software (acquired Filtrbox) and Lithium (acquired Scout Labs). Powered acquired three marketing agencies: crayon, Drillteam Marketing, and StepChange Group.
• Location, Location, Location. Most companies stayed close to home in 1H 2010. Mzinga and Jive Software relocated their headquarters (Mzinga moved its HQ a few miles down the highway; Jive’s shift was from Portland to San Francisco). Lithium opened a new office, also in San Francisco, not too far from its central office in Emeryville.
• Partners. The 12 companies announced partnerships with ..