Webware

TechCrunch reported late on Friday about a hot new rumor in the social media space. The Germany-based business networking site Xing, according to TechCrunch's Michael Arrington, may be in talks to acquire online address book management company Plaxo. The deal is rumored to be in the $250 million range--a significant buy indeed.

Plaxo, for some background, was founded in 2002 by Napster co-founder Sean Parker. Since then, the company claims to have hit 15 million members (as of September 2006). It synchronizes primarily with Microsoft Outlook address books, but has also formed deals with companies like Yahoo and AOL's Instant Messenger division.

When I met with Xing founder and CEO Lars Hinrichs this spring, he made it very clear that the company believes an acquisition strategy is the best way to spread the company's influence beyond Europe and across the globe. For example, when Xing's team wanted to make inroads in Spain, it purchased regional networking site eConozco. Hinrichs also emphasized that Xing hoped to make some inroads into the U.S. market, so it's not all that surprising that news would surface concerning a potential Xing acquisition of a big stateside name in business networking.

But as we all know, here in the U.S. there's a big obstacle for Xing in the form of LinkedIn--it's virtually unrivaled in its field at the moment. As a result, any influence-spreading acquisitions on Xing's part would have to be pretty major.

So while this is a rumor, and a rather unsubstantiated one at that, it's certainly a deal that would make some sense if it were to materialize.

Here in the U.S., there's really only one big player in the sector of social networking sites geared toward professionals eager to make business connections: LinkedIn. Other business-oriented social networks have emerged, but none have shown signs of really eating into LinkedIn's stateside market share. That, however, is what Xing is trying to change.

Xing, formerly known as the less catchy OpenBC (BC stands for "Business Club") got its start in Germany and now boasts 1.69 million members. The company's moved beyond Germany largely through acquisitions and partnerships; when it expanded to Spain, it purchased a regional social network (eConozco) in order to ensure success. I met with Xing founder and CEO Lars Hinrichs earlier this week to hear about the company's impending campaign to make a splash on U.S. shores. It's an ambitious goal, since other overseas-based social networking sites have experienced real uphill climbs. On the youth front, Bebo is huge in the U.K. and it'd be an understatement to call South Korea's Cyworld a genuine phenomenon, but in the State they're still playing second fiddle to MySpace.

So the big question is, why Xing over LinkedIn? Hinrichs told me that it's all about the functionality. LinkedIn, he said, is "good for resumes." He said that Xing's simply better at helping people do business. There aren't a whole lot of features that LinkedIn doesn't offer--discussion forums, easy access to expert advice, tagging functionality on profiles, and a mobile platform--but Hinrichs claims the numbers shows that Xing's a better service. According to Comscore statistics, a Xing visit lasts an average of 66 minutes while a LinkedIn visit clocks in at only 19, and 89 percent of LinkedIn's premium members have been active in the past 30 days (which makes sense, since they're the ones forking over cash.) The site, by the way, is completely free of advertising and Xing's business model relies entirely upon revenues from the opt-in subscription accounts.

But here's the truth: better service or not, the secret to success is really in the people who use it. Xing has not yet revealed what kind of partnerships and acquisitions it's planning to leverage in order to break into the U.S. social networking market. If it plays the right cards, it could be a legitimate contender. We'll keep an eye on this one.