Start-up: Social Services

October 29, 2007


Internet social networks, in the popular imagination, are refuges for geeks who seldom see the light of day and enjoy a purely theoretical romantic life. But iWiW, the remarkably popular Hungarian online network, is surprisingly rooted in what geeks call “offline” reality.

Tamas, a 28-year-old lawyer, explains how iWiW oils the wheels of his personal life: “It’s just like a database for your social life,” he says. “So, for example, I met this girl in a bar last year, and I remembered her name but didn’t get her number. Before iWiW I would have had a problem, but all I had to do was search for her name, select the account with her picture, and send a connection query. Now she’s my girlfriend!” iWiW (which stands for International Who is Who) supposedly disdains such opportunistic tactics, but the fact is that much of its success rests on just such uses. With 1.6 million members out of a population of 10 million, if you’re a young, social and computer-literate Hungarian, you’re almost certainly a member.

It was perhaps this opportunity to have almost universal access to the country’s most sought-after consumers that prompted T-Online, a part of Deutsche Telekom, to pay almost €4m for iWiW in April 2006. The deal made the founders, led by Zsolt Várady, pretty well-off overnight – although they must now be wondering if they could have held out for more, given the speed with which T-Online has increased the operation’s revenue from online advertising.

“We started the network in 2002. At that time it had no name; it was just an IP address where friends could connect. We had no cash, we used old computers and we worked from home,” says Márton Szabó, another founder, who is now managing director of iWiW. Rather than being a scheme aimed at making millions, iWiW owes its existence to a “sociometric survey” of people’s social habits, which revealed that the internet could improve social dynamics. As membership snowballed to 20,000 in the first six months, the founders brought in a local software firm.

iWiW remains different from giants like MySpace and Facebook. If you want to join, you need to be invited. As Szabó says: “iWiW is a social network, whereas MySpace is really a content network. Our network mirrors real social relationships; it’s much more intimate.” Here iWiW bears a resemblance to, the network for the young, international and rich.

iWiW, then, could be among the first of a generation of online networks that connect people to those they are already connected to in some way, rather than exposing them further to the randomness of the net. Only now is this ethos starting to bear fruit on the bottom line.

In 2005 iWiW turned over just €20,000 and made no profit. Under T-Online it turned over nearly €900,000 revenue and made a profit, the vastly increased revenue stream owing everything to a strictly commercial approach to web advertising adopted by T-Online. How that potential business develops in the future is anyone’s guess, but it proves the old maxim that it’s not what you know, it’s who you know – as they say in Hungary.