Friendster CEO Quits as Site Traffic Drops
Former NBC Entertainment President Scott Sassa resigned Wednesday as chief executive of Friendster Inc., the innovative social-networking website now falling victim to the same buzz that made it a cultural phenomenon.
Sassa was hired a year ago to transform Friendster into a media company supported by advertising. But as Friendster slid further behind upstart rivals, Sassa decided last month that he couldn’t do it.
“I wasn’t the right person to go forward,” said Sassa, who oversaw development of such shows as “The West Wing” at NBC from 1997 to 2003. “I thought that where the company was, we wanted someone more versed in technology.”
The Friendster board hired Taek Kwon, an executive vice president in IAC/InterActiveCorp’s Citysearch unit, to succeed Sassa on June 13. The Mountain View, Calif., company also said it had laid off five employees, leaving a staff of 50.
Friendster became the first popular social-networking site, where users could create personal pages and invite people to link to them. The idea was to connect people, through mutual interests, for friendship or dating.
But its fortunes have flagged recently. The website was plagued with slowdowns for months, frustrating many users. Although the company has largely fixed the technical problems, it faces a greater challenge: Giving people a reason to stick around after they sign up.
Yahoo Inc., Microsoft Corp. and Google Inc. have also launched or tested competing programs that they might integrate into many of their online services. But while Friendster was bracing for competition from the Internet giants, it was surpassed by two upstarts: Los Angeles-based MySpace.com, which focuses on music, and Thefacebook.com, which caters to college students.
“You live by the word of mouth, you die by the word of mouth,” said Charlene Li, principal analyst with Forrester Research.
Sassa joined Friendster in June 2004, shortly after founder Jonathan Abrams gave up day-to-day control of the company. Abrams remains chairman of Friendster’s board.
During Sassa’s tenure the company has experimented with offering weblogs, horoscopes and news headlines in an effort to get visitors to spend more time on the site, which advertisers like.
It hasn’t worked. Friendster attracted 703,000 visitors last month, down 15% from April 2004, according to research firm Nielsen/NetRatings. The average visitor spent 14 minutes on the site during the month, a 65% drop year over year.
In the meantime, MySpace has soared to 8.2 million monthly visitors, who spent one hour and 23 minutes on average. The service has become popular among music lovers and musicians; such groups as R.E.M., Audioslave and Nine Inch Nails have let MySpace users listen to their new albums before they arrived in stores.
Thefacebook, started last year by Harvard University students, received 1.3 million visitors, who spent 25 minutes on average, according to Nielsen.
As social networking grows, other companies have shuffled their executive ranks to remain competitive, often replacing founders with outsiders.
“When the original innovator is ostracized from his company, I think that puts it in jeopardy,” said Sean Parker, a founder of Plaxo Inc. and Napster Inc. and now president of Thefacebook.
Mark Pincus, founder of the Tribe.net social-networking site and an investor in Thefacebook, was replaced as CEO of his company last month. Pincus said such volatility was to be expected in any new market, as companies experiment with different models.
And he said some networking sites would inevitably rise quickly and then fall quickly. The same hip cachet that draws early adopters wears out as speedily as it does for a hot restaurant.
“But you also have California Pizza Kitchen and the Cheesecake Factory,” Pincus said. “You have restaurants that are good value, and you go back to them for years.”
Russell Siegelman, a partner with Friendster investor Kleiner Perkins Caufield & Byers, acknowledged that Friendster had slipped but said he expected Kwon to find solutions.
“We’re as optimistic now as when we invested,” said Siegelman, who soon will succeed Kleiner Perkins colleague John Doerr on the Friendster board. “I’m not here to tell you it’s the next Yahoo. But I think it’s going to be significant, and it’s going to be around.”
Friendster would not provide financial information about the company. Sassa said revenue grew tenfold during his tenure.
Sassa said he was looking for a new job but expected Friendster to survive.
“It’s certainly not like we’re building buggy whips when cars are just coming into fashion,” he said. “Social networking is just in the early innings, and Friendster is a great brand.”
David Card, a media analyst with Jupiter Research, agreed that Friendster remained a well-known name. But when it comes to selling enough ads or subscriptions to make a profitable business, he isn’t convinced that Friendster and most other stand-alone social-networking sites will be more than a fad.
“It seems to me that it’s a feature, not a business model,” he said.
