Notes on THE BUSINESS OF SOCIAL NETWORKING; iBreakfast (Wed, Mar. 17, 7:30-10am)

Notes on THE BUSINESS OF SOCIAL NETWORKING; iBreakfast (Wed, Mar. 17, 7:30-10am)

PEKING PARK, (40th btwn Park & Mad) 100 Park Ave

Pitch: Now that Barry Diller’s IAC Group has purchased ZERODEGREES, Social Networking has become the hottest phenomenon on the Web. Why, and where can we go with this? The technology is not new, Andrew Weinreich first launched it with But it has suddenly become discovered for business, “friend-making” and dating purposes. Why now? Is there really a business in this and what does the VC frenzy mean for the rest of our industry?

Moderated by Alan Brody


ADRIAN SCOTT is Ryze’s founder. Previously he was a founding investor in Napster, co-founded a startup called Applesoup/Flycode, and developed technology for companies like Charles Schwab and Bank of America. He is assisted by a small, elite crew in building Ryze.

ANTONY BRYDON, President and Co-Founder of Visible Path focuses on new technologies, strategic direction and new market opportunities. He was an analyst at R. B. Webber & Company, a strategy consulting firm and venture fund in Palo Alto, CA.

ANDREW WEINREICH is the creator of and affinity website for political supporters. Previously, he served as Founder, President and Chief Executive Officer of, an online community for young adults that he sold in January, 2000 to Youthstream Media Networks, a publicly held company, for $125 million.

MARK JEFFREY, is head of Product Development for ZeroDegrees in Hollywood, CA. He is also founder of The Palace, Inc., a respected pioneer in online communities that drew more than one million users at its peak.


DAVID TETEN, co-author, The Five Keys to Building Business Relationships Online ( He is CEO of Nitron Advisors, LLC (, which provides institutional investors with access to frontline industry experts. David is also Chairman of Teten Recruiting (, an executive recruiting firm.

Scott: Ryze grew out of a desire for him not to be a bottleneck, so that requests dont have to go through him.
you can handle more than 150 interactions with Ryze.
There are people with relationships with over 1m people; they’re celebrities
Advanced users can create networks of people with shared interests. This allows group dynamics, not just 1-to-1 connections.

Cash flow positive for over a year, with no VC money.

3 revenue streams:
+ subscriptions @ $9.95/month. Can do searches.
+ Events in 40 cities around the world
+ Classified feature ads

now building out infrastructure and team
they’re looking at debt financing
they’ve been approached by brands who want to leverage this energy, and by some corporate clients who want to create their own internal networks

Weinreich: we grow and manage networks for member organizations.
Old paradigm: an organization like that goes out and sets up a website. New paradigm: outsource all that.
Social networking is meeting the people you don’t know thru people you do know
Few things on the web have fundamentally changed existing behavior; this will.

Your 2nd degree is the first degree squared.
Internet allows you to codify all those relationships.
This allows you to make dating, purchasing, etc. more efficient
You can social network at virtually no cost
Cost of member acquisition has dropped to near zero
IStandfor is profitable, not VC-backed. Will soon launch service for AirAmerica radios.

Brydon: focus on enterprise software applications
they use term ‘relationship capital’. We think interest is growing in this space because relationship capital is one of the most valuable and least visible assets. We figure out how and where relationships can be applied to solve business problems.
Over $50M has gone into this space. Many people are asking, is this space overfunded? Their answer: no.
If Verizon can add $50m in revenues, that’s huge value.

We’re very data-centric.

Each individual on average is connected to 2500-3000 people. Our relationship networks are much denser and more detailed than anticipated.

Six of top ten sales pain-points result from poor visibility across the network.
With our service: Close rates are 22% higher. Sales cycles are 27% shorter. Deals are larger.

Typical CRM systems overlooks 98% of relationships. Visible Path draws on: HR database, company CRM, messaging server, IM, Calendar, meetings, tasks, company directories, phone records.
SNA map analyzes each relationship and determines strength. Who makes introductions, and who makes introductions that close deals?
They built connection engine, and alerts people about new ways to reach people they’re trying to reach.
Browser interface, no data entry, full integration with

Privacy, control, and anonymity are controlled.
Individuals own and control all relationship info.
Individuals designate which applications and folders to scan.
Only the individual can access contact and relationship info.
Users can edit and delete some or all contacts at any time.
KEY: privacy, control, and anonymity
Launched beta in Sep 03. They have betas in dozen companies.
There will be explosion of technology around this space in next 2 years.
A year ago, Friendster created excitement. Now we need real value.

Mark Jeffrey:
the five founders bootstrapped zerodegrees
had VC termsheets when they started dialogue with IAC. They’ve spent about 1/30 of what competition has spent on developing their product.
They’re targeting the individual business consumer. He/she will pay a subscription to use that person’s own network.
People are not necessarily comfortable handing over all their contacts to their company. so ZD prefers to sell direct to individuals.
Has Plaxo-like functionality
Very deep integration with Outlook. Can use all functionality from within Outlook.
Have a concept of the ‘inner circle’; your inner circle is permitted to view your rolodex
They have Ryze-like profile pages.
Full XML backend
‘old email address’ support

Questions for speakers:
Do people want separate personal and business networks?
How overcome trust issue in company owning the sales data?
How do you manage tension about using relationships to generate revenue. Brydon comment on commission.
How does explicit acknowledgment of relationship create new tensions?


Business model?

Weinreich: IStandfor charges: $2,000-$20,000/month Peter Deutsch (Istandfor candidate): when you register as member on their site, you say ‘here’s why I support deutsch’. And then provide email addresses of your friends, and tell them why you support deutsch. You can provide campaign contributions.

Visible Path: enterprise software delivered as a service. For 1000-person company, $100,000/year.

They’ll provide other services on top for an additional $100,000/year.

TJ Cardenas: Do you see Visible Path as a module in SFA?

Brydon: people have enough apps on their desktop; we operate within those systems. We plug info directly into those apps. We’re now working on relationships with those app vendors to sell and distribute those platforms.
These systems are built on top of individual’s need for privacy.

David Berkowitz, EMarketer: What can’t this accomplish?

Weinreich: these systems take existing behavior that’s offline and move it online
Social networking is a facilitator.
Jeffrey: salespeople don’t want to give up their relationships. inner circle has been a far more popular feature than they initially thought.
Weinreich: when weinreich was raising $50K, he sat down next to the funder, went thru his rolodex with him, and turned that $50K into $500K.
Brydon: limiting factor is strength of underlying relationships

Dan Pirisi, how do you make money when season is over?

Weinreich: candidates don’t do enough to maintain relationships in off season.

David Rose, active angel: senior people are indeed using this. for our angels group, we are looking at visible path.

Brydon: There must be a weighting engine in this software, or else the system will drown, because when you have 1000 relationships on Ryze, it’s meaningless—-everyone knows everyone. There are different types of relationships: trust, affinity, and respect

Dan Spinner, Progressive Strategies: when and how will they link to one another?

Weinreich: look at IM space: there are three incompatible systems.

Mike Turpin, chairman of MarketWire: 20 years ago: big buzzwords were DTP, contact management, AI. Which will this be?