I may have to make a classmates.com category.
The mild contretemps with someone at Classmates.com got me to thinking about it a bit more. It seems that they were planning to take it public at some point:
NEW YORK (AFP) – The pioneering online social networking firm that operates Classmates.com has sought approval from US regulators to launch an initial public offering (IPO) of stock valued from 120 to 144 million dollars. [From Classmates.com plans US stock market debut – Yahoo! News]
That was back in August: seems like if it was going to happen, it would have by now. This fellow says the parent company hopes to raise $120 million from the sale for market cap of around $700 million. Ah, a link there points to the IPO pricing to take place next week. We’ll see.
It all sounds a little bubblicious. 50 million members seems like a lot. But as noted here free registrations don’t translate into revenue. And when you read stuff like this (sorry, it’s hard to make out, but it’s yet another member who found out that the chief privilege of membership is to shell out money) and the links there, you’d be hard-pressed to find a less appealing investment opportunity.
According to this, they have 2.7 million paid members out of those 50 million (5.4%) and lost $250,000 on revenue of $42.4 million for the quarter 3/30/07. They showed a small profit on $152MM in 2006 but their filing admits to low conversion numbers. Not sure how it cost $150MM to host some content that is either scraped from directories or user-contributed.
Check out how many classmates.com-related search queries I see in a day:
If I was to take on this idea, and it started to look like it wasn’t going to cover costs, sponsorships or well-targeted ads (you would know a lot about your audience in a situation like this and could probably arrange some useful stuff for your members) would probably work. 2.7 million times the $20 I tossed out as an idea is a little over $5 million, but if all you’re paying for is rack space, bandwidth, and a skeleton crew of staff (some machine-minding expertise, unless you get a good co-lo plan), some software expertise (would you need a staff person or could you just contract with someone to build and enhance as you went along?), and a customer-facing staff. If you had 20 people and paid out $2MM in staff costs, you’d have some change left over. And if you kept it transparent and non-spammy/scammy enough to keep people interested, you might see better conversions.
But given the success of FaceBook, would I try it now? I think not. The core question for any new business is, does it solve a problem you care about? In this case, no. That there is 3,000 miles between me and my high school is just the way I like it.