When it comes to social networking, some investors seem to think that shopaholics are the next big thing.
ThisNext, a social-shopping site where users create lists of products they recommend and schmooze with others, has pulled in $5 million in second-round funding, according to Private Equity Hub.
Earlier this week, another social shopping site, StyleFeeder, announced that it had netted $2 million in first-round funding.
StyleFeeder is recommendation-driven, a sort of Last.fm for shopping. By contrast, the reviews- and list-focused ThisNext has a model more like that of business-reviews site Yelp.
Santa Monica, Calif.-based ThisNext, which was founded in mid-2006, has a well-stocked executive squad: CEO Gordon Gould previously founded Blogsmith, which was purchased by AOL, and served as president of the now-defunct Silicon Alley Reporter. Serial entrepreneur and Silicon Alley Reporter founder Jason Calacanis is also on ThisNext's board of directors.
No matter what the model is, social-shopping networks are attracting investors because they may be more profitable than the average social network. The sites typically aren't directly connected to retailers. But in addition to the advertising support that so many Web 2.0 sites rely on, social-shopping sites could generate additional revenue through affiliate programs or partnerships with retailers that sell the products recommended by site users.
The $5 million in ThisNext's second-round funding reportedly comes from Anthem Venture Partners and Clearstone Venture Partners. Its first-round funding in early 2006 brought in $2.5 million, according to Private Equity Hub.
StyleFeeder, a social shopping site that aims to do for the retail sector what StumbleUpon did for browsing or Last.fm did for music, has announced that it's pulled in $2 million in Series A venture funding from Highland Capital Partners and Schooner Capital.
The start-up, based in Cambridge, Mass., plans to use the $2 million to hire more employees.
StyleFeeder, which has operated until this point on seed funding, operates a "recommendation engine" for fashionistas based on which products users rate and then purchase through affiliates. Much like other recommendation sites, StyleFeeder then suggests related products and can connect users with similar taste.
The company additionally operates a Facebook application that has been installed by 500,000 users (overall, not active users). That pales in comparison with the 2.5 million who log into Slide's FunWall daily, but it's just slightly under the approximately 570,000 who play that horrifically controversial Facebook game, Scrabulous, each day. Basically, the application reaches a fairly decent number of eyes.
The social shopping niche is crowded with start-ups like ThisNext and StyleHive, as well as M&A buys like ShopStyle (purchased by Sugar Inc.) and Kaboodle (snapped up by Hearst Corp. last year). There has, at least until this point, been no clear front-runner in the space.
Late on Tuesday night, the news broke on the Wall Street Journal's Web site that publishing empire Hearst Corp. has made plans to acquire Kaboodle, a social shopping site that launched last year and now draws in over two million unique visitors per month. Like rivals ThisNext and StyleHive, Kaboodle lets members recommend and learn about new products through compiling lists; it also connects users who have similar shopping tastes.
Hearst and Kaboodle issued a joint press release on Wednesday morning announcing the acquisition deal. "With its impressive technology, tools and audience, Kaboodle is a natural overlap for Hearst Magazines," Cathleen P. Black, president of Hearst Magazines, said in the statement. "We think Kaboodle has terrific potential for many of our brands, especially in the fashion, beauty and consumer technology categories. Our readers will be able to find the products featured in our magazines, shop electronically with their friends and get their feedback. It's another means for making sure our readers stay engaged in today's saturated media landscape."
Kaboodle will become a property of Hearst Interactive Media and Hearst Magazines Digital Media. Terms of the deal were not disclosed, but blog reports have suggested that it's as much as $40 million.
Journalists and bloggers have been quick to note that recent months have seen a sizeable number of Internet start-up acquisitions (and rumors thereof) by large media companies, many of which are headquartered in New York or Los Angeles rather than Mountain View or Redmond. In May, finance news video blog Wallstrip was purchased by CBS Interactive and media-sharing site Photobucket was acquired by News Corp.'s Fox Interactive Media; more recently, environmental blog TreeHugger was acquired by Discovery Communications, and the latest rumor is that social bookmarking site Clipmarks is in the midst of a deal with Forbes.
GigaOm's Om Malik noted on Tuesday night that "from a Silicon Valley perspective, emergence of buyers outside of the G-Y-M (Google, Yahoo, Microsoft) triumvirate is a good thing."
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