Social networking service Tagged, Inc. announced it has acquired the social game network hi5 today, doubling Tagged’s monthly active users to 20 million. The combination will also increase the total number of registered users to 330 million, up from 100 million.

According to The WSJ’s report, the deal’s terms were not disclosed, but include the hi5 website and user base.

Hi5 used to be among the top three social networks in 2008, behind MySpace and Facebook, but suffered as Facebook began to move into international markets. Since then, hi5 has tried to remain competitive by reinventing itself as a social gaming company. In February of 2010, it acquired the social game developer Big Six, whose platform was to become a part of the hi5 network. Earlier in the year, the company suffered from layoffs and also hired a new CEO, Bill Gossman.

With the focus on gaming, hi5 closed an additional round of funding in July 2010, raising $14 million. The round, led by Crosslink Capital, brought the social network’s funding to over $34 million. It also appeared to include the $3 million in debt funding raised from Mohr Davidow in April 2010.

Sadly, it was all for naught. By September, the company confirmed “significant layoffs” where 29 people (19 FT) were let go.

Tagged, meanwhile, has been growing. In January, it doubled staff and gave out raises, acquired social networking client Digsby in the spring, and, more recently, acquired the machine learning company Topicmarks.

Tagged has a small U.S. presence, with about 30% of its user base located here. But the network is popular in Southeast Asia, South America as well as in some European countries like Spain, Portugal and Romania. Only 10% of its user base overlaps with hi5, which is what made the deal appealing. Post-acquisition, Tagged will leave hi5′s website up and running, allowing users to enter the Tagged site through hi5′s domain.

Tagged’s revenue was $33 million in 2010, and CEO Greg Tseng told the WSJ he expects it to be between $43 million and $45 million in 2011. Unlike Facebook, which is focused on connecting people who know each other, San Francisco-based Tagged is designed to be a network for meeting new people through games, gifts, browsing features and more.

Earlier today, we heard social network Hi5 was laying off a large number of their remaining employees. When we pinged them about this, we expected the usual “no comment” or simply no response. Instead, here’s what we got from President/CTO Alex St. John:

In support of our market strategy to launch next generation social gaming platform by early next year, our operations team migrated the site infrastructure to the Windows Server OS. This enabled us to consolidate servers, reduce data center costs and increase site performance (We achieved a nearly 12:1 reduction in server and database requirements). We have also been building the next generation site in a new architecture, .NET framework, and have moved away from Open Source and Java technology. As we have recently turned the corner on our technology migration efforts we have been able to significantly reduce the number of positions required to support the older hi5 site and are in the process of re-organizing the company to focus entirely on the development and deployment of our next generation social play site.

Did you catch that in there?

“we have been able to significantly reduce the number of positions required to support the older hi5 site and are in the process of re-organizing the company”

Poor phrasing and verboseness aside, yes, there have been a large number of layoffs.

That’s too bad. I feel like I’ve read this particularly story several times over the years. There were big layoffs in 2008 and 2009 as well. I recall writing about the massive round of layoffs at Hi5 in 2009, and the company trying to tell me the story was “inaccurate” but refusing to say how it was inaccurate. It turns out it was accurate. Though I don’t think anyone with the company back then is still with the company.

Once the third-place social network behind only Facebook and MySpace, Hi5 then pivoted towards gaming completely, and raised a new $14 million round last year. Now it’s on to another “next generation” version of Hi5. And apparently it’s one that requires much less manpower.

Says St. John:

We are still in the process of planning the next generation site launch and expect to release more information to the press as we finalize the details of the launch date and launch feature set.

The departing folks were very talented and we hated to let them go but our business is changing rapidly now. We hope that other great companies in this area snap them up quickly.

Update: We’ve confirmed with the company that 28 people were let go (19 full-time plus 9 contractors). These employees were working on site operations.

When Facebook recognized that early social media games were getting a free ride on their network, they shut down the free viral channels these games relied on for audience, started charging market prices for advertising, and demanded a cut of all commerce transactions (see “Facebook Credits”). This changed the economics of social games dramatically. Reaching a large audience easily and for free ceased to be a benefit of developing social media games. In the downloadable casual game business, game developers get a 25%-35% share of the revenue their games generate online when published via channels other than their own. With Facebook charging a 30% premium for Credits and taking an additional cut on advertising, it’s likely that the cost of marketing a social media game is converging on what it costs in the mature downloadable casual game business.

With free virality shut down, social game developers are now forced to compete in the full online game market where a slew of great multiplayer games (such as Club Penguin and Runescape), which interestingly are not called “social media games” because they don’t NEED a social network for distribution, succeed and thrive purely on their viral merits with no investment support or dependence on Facebook for their enormous popularity. This creates a very interesting situation: games that nobody wants to play unless they are inside a social network competing against great viral multiplayer games that monetize and spread more efficiently than social media games once “normal” market pricing for promotion is introduced on Facebook. The only advantage social media games have currently is that the Valley thinks they are “hot” and is willing to invest lots of money in them.

The next stage we’re likely to see is a replay of what happened in the casual game space between 2004-2006 when capital flooded downloadable casual game companies enabling them to buy audience and distribution at prices ABOVE the monetizable value of the games they were selling. Casual game companies went to war, propped up by investment dollars that enabled them to overspend on audience acquisition, which produced the illusion of user and revenue growth even as every customer acquired in this manor returned less revenue than the cost of acquisition. As long as the investment money flowed, casual game publishing seemed to grow, but once the bubble popped in late 2008, it became very clear which companies had built sustainable publishing businesses and which ones had overextended themselves. RealNetworks, once flush with cash from its victory over Microsoft in an anti-trust lawsuit, was apparently the largest and fastest growing casual game publisher, today it is spiraling into decline.

This same cycle is now taking place in social media. When Facebook changed the rules, the early leaders in the space faced two extremely unpleasant realities: 1) Unlike casual gaming, their popular franchises were ineffective at acquiring Facebook audience directly and 2) Paying market rates for audience made their books look a whole lot less pretty. Faced with this challenging circumstance, social game development studios have started taking aggressive steps to remedy their situations, including:

1. Finding buyers as fast as possible before people realize that their growth and maybe even their businesses are not sustainable
2. Leveraging the abundant capital available to try to buy their way out of dependence on Facebook by either acquiring their own standing audiences or by acquiring non-Facebook dependant game companies
3. Overspending on marketing to try to buy audiences to preserve their apparent growth even as their books leak money and their earned audiences decline

What does it mean that Zynga abruptly canceled its deal with MSN to carry Farmville? Probably that they paid a lot for the distribution only to discover that the game did not perform well enough there to justify the expense. Outside of Facebook, Farmville simply can’t hold its own against games like Bejeweled and Scrabble when it comes to monetizing a casual audience, and these games set the market price for advertising on the sites they dominate.

Want to see which games dominate the online economy in a competitive market where distribution doesn’t come for free? Simply check out the front pages of the leading downloadable casual game publishing sites. The minute that Farmville genuinely has superior online economics, it will displace these games. But, until then, it appears that Cubis monetizes best on MSN, and Zynga will lose money by buying its front page position to promote Farmville.

In the end, I believe that “social games” as we know them will be a forgotten internet fad, ultimately consumed by the already mature online market for downloadable and multiplayer games. The only NEW discoveries that remain will be the realization that social networking itself is a new kind of game play, social graphs are an extremely efficient way for games to market themselves and that microcurrency business models blended with advertising are a superior way to monetize online games in general. Everything else will be consumed by the highly competitive and established downloadable and multiplayer online game market. If some of the big names in social media gaming survive, it will be because they leveraged their abundant access to capital to transform themselves away from dependence on Facebook.

hi5, a gaming-focused social network that most people forgot about long ago, has just closed a new round of funding of over $14 million led by Crosslink Capital. This brings the social network’s funding to over $34 million. This round appears to also include the $3 million in debt funding raised from Mohr Davidow in April.

The new funding will be used for hi5′s continued expansion into social gaming and virtual goods. Hi5, which has been actively remodeling its site to cater to the gaming industry, just bought gaming startup Big Six. Last fall, the social network launched a totally revamped site that places a much stronger emphasis on games and virtual currency, along with a new avatar system.

In December, hi5 brought on a new president, gaming industry veteran, Alex St. John, to help lead the social network’s efforts. Earlier in the year, the company suffered from layoffs and also hired a new CEO, Bill Gossman.

The push into gaming isn’t a bad idea for hi5, which clearly cannot compete with Facebook. The network has only 60 million members compared to Facebook’s 500 million users. But hi5 faces a number of fast-growing and heavily funded competitors in the social gaming space, including Zynga and Playdom.

Hi5, which has been actively remodeling its site to cater to the gaming industry, says this funding is part of a larger Series B round. Another undisclosed investor will be leading the round. The company just bought gaming startup Big Six. Last fall, the social network launched a totally revamped site that places a much stronger emphasis on games and virtual currency, along with a new avatar system.

As we’ve written in the past, with the massive success of Zynga and Playfish, it makes sense that hi5 would try to create a social network that centers around gaming itself. hi5 has over 60 million members, which is a far cry from Facebook’s 400 million users.

In December, hi5 brought on a new president, gaming industry veteran, Alex St. John, to help lead the social network’s efforts. Earlier in the year, the company suffered from layoffs and also hired a new CEO, Bill Gossman.

Here’s what he said (paraphrased): “Zynga makes mediocre games. What Zynga discovered is that Facebook had left an opening for spam. They acquired a lot of audience from a security loophole that Facebook has since closed. And they aren’t social. Their only social game is Poker — it’s the only one that you can chat in. All subsquent games are turn based and spread over days.”

The audience’s response? A round of clapping.

Earlier in the panel, St. John said that Facebook was somewhat schizophrenic, offering users both more professional features and gaming. Of course, hi5 is now a dedicated gaming platform, so he isn’t exactly an unbiased observer.

Big Six’s founders, Kevin Gliner, Monty Kerr and Chad Hansing, will join the hi5 management team. Hi5 says the deal will boost the social networks efforts in developing in commerce platforms and payment processing offerings. Right now, gaming is a central part of hi5′s strategy for growth so it makes sens for the social network to acquire innovative technologies and talent. The games section of hi5′s site accounts for around 1/3 of the site’s traffic, and direct user payments through the game already account for 15% of hi5’s revenue.

Apart from the currency and payments technology, Big Six’s social gaming platform will also become part of hi5. With the massive success of Zynga and Playfish, it makes sense that hi5 would try to create a social network that centers around gaming itself. hi5 has over 60 million members, which is a far cry from Facebook’s 400 million users.

In December, hi5 brought on a new president, gaming industry veteran, Alex St. John, to help lead the social network’s efforts. Earlier in the year, the company suffered from layoffs and also hired a new CEO, Bill Gossman.

hi5, the largest social entertainment site focused on gaming, today announced the acquisition of social gaming company Big Six. The Austin-based company was founded by gaming veterans Kevin Gliner, Monty Kerr and Chad Hansing, all of whom will join the hi5 management team, as announced separately today.

The deal enhances hi5’s growing leadership in commerce for virtual goods and games. Building on hi5’s current commerce platform, which includes a global virtual currency called hi5 Coins, support for over 60 payment methods worldwide, and new advertising-based transactional capabilities – the Big Six acquisition brings significant new technology and software platforms in the areas of payment processing, fraud detection and conversion optimization. In addition to its proprietary commerce platform, Big Six also designed a social gaming platform which will become part of the core hi5 site.

“The Big Six team and technology are a perfect complement to what we have already developed at hi5,” said Bill Gossman, CEO of hi5. “Over the last two years, we have made a substantial investment in building out the industry’s most robust commerce infrastructure for virtual goods and gaming and this acquisition will considerably augment both our commerce platform and domain expertise.”

“We are excited to be joining a company that shares our philosophy and vision for how social gaming will evolve,” said Kevin Gliner, co-founder and CEO, Big Six. “This deal is a perfect match because it enables us to accelerate our go-to-market plans by leveraging hi5’s huge global audience.”

Italian writer, blogger and photographer Vincenzo Cosenza has for the second time put together a visualization that shows the most popular social networks around the world on a map, based on the most recent traffic data (December 2009) as measured by Alexa & Google Trends for Websites.

The first one, which we featured in June 2009, already painted a picture of Facebook taking over the world from the West, but the second one shows its relentless colonization even more clearly.

Facebook, with over 350 million users, is the undisputed leader of social networking in the English speaking parts of the world, and has been making strides in Latin-America, Europe and Africa as well. Based on Alexa data only, Facebook has even taken over Orkut in India, historically a high-flyer in those parts. Google’s social network remains the most trafficked in Brazil, however.

Facebook clone Vkontakte.ru has been able to resist and stop Facebook from becoming the leader in Russia. It’s worth noting that Vkontakte is largely owned by Digital Sky Technologies, which also owns a significant stake in Facebook, so you can see how they could potentially melt together in the future.

Hi5 has also seen Facebook take over most of the territories where it was leading, and has only been able to stop the social network from dominance in Peru, Portugal, Romania, Thailand and Mongolia. Meanwhile, QQ is still ahead of everyone else in China, where the number of Internet users is expected to double and reach a staggering 840 million by 2013.

Nowhere to be seen on the map: MySpace (which only leads on the Island of Guam).

The new hi5 still retains many of the same key features you’ll find on any social network — your profile consists of a photo or avatar, you can browse through your friends, and so on. But there’s clearly a much bigger emphasis on the site’s games and virtual currency (called ‘Coins’) than there was in the past. In the old design, the Games link was buried in the header, which also included links to Photos, Messages, Applications, and more. Now Games and Coins are both featured just as prominently as the link to your Profile and Friends. If it isn’t the first thing people will click on, it’s probably the second.

Alongside the new emphasis on gaming, hi5 is launching an avatar system called hi5 Stars, which features Flash-based animated 3D avatars (no download required). You’ll be able to change the appearance and movements of these to fit your current status, which anyone will see when they visit you profile. There really isn’t much you can do with them at this point, but down the line hi5 will be using these as part of its social entertainment experience, in much the same way Nintendo has done with the Wii’s Mii system, we’re told. This means that you will likely be able to use your avatar in some games, which is sure to be a crowd pleaser.

Hi5 is not especially popular in the United States compared to Facebook, but it’s quite popular abroad, with over 60 million monthly unique visitors (only 10% of which come from the US). This would normally pose a challenge to developers who would have to figure out how to engage in transactions with users around the world, but hi5 has that taken care of. The social network has set up 60 different payment systems for users worldwide, all of which convert to hi5 Coins. And aside from the benefits of making international payments relatively painless, virtual currencies tend to lead to more impulse buying (it’s much easier to toss away a few Coins than a few dollars). hi5 takes a 50/50 rev share of any money spent in a game.

Even before the redesign hi5 games section has been doing very well. It only launched in February and already accounts for around 1/3 of the site ‘s traffic, and direct user payments through the game already account for 15% of hi5′s revenue. Expect to see that number jump substantially over the next few months.

Even with a reasonable amount of overlap accounted for, these are significant numbers, albeit in countries where potential advertising income is generally much lower than it is in the U.S. and Europe.

OLX (a competitor to Craigslist in the United States) and hi5 (a competitor to the likes of Facebook and MySpace on a global level) claim the fresh partnership serves to consolidate both companies’ hold on the Latin American market, while making way for accelerated growth in the rest of the world.

As part of the agreement, hi5 will implement OLX features that include the ability to display ads on a user’s profile page and to see friends’ ads, as well as a feature to tell friends about their own ads via newsfeeds. OLX will also allow users to include videos and pictures in classified listings, comment, post/view listings in over 39 languages and 90 countries, and access the site from mobile devices. The latter two features are clearly meant to appeal to a large international user base.

Oodle, another major player in the online classifieds space, has been scoring similar deals recently with social networking services and portals like Facebook, MySpace and AOL.

Even on the Web, world dominance must be achieved one country at a time. While Facebook has long been the largest social network in the world, and should soon pass MySpace in the U.S., it is not the largest social network in every country. The map above created by Vincenzo Cosenza resembles more a game of Risk, with Facebook sweeping across the globe from the West.

Using Alexa and Google Trend data, Cosenza color-coded the map based on which social network is the most popular in each country. All of the light green countries belong to Facebook. But there are still pockets of resistance in Russia (where V Kontakte rules), China (QQ), Brazil and India (Orkut), Central America, Peru, Mongolia, and Thailand (hi5), South Korea (Cyworld), Japan (Mixi), the Middle East (Maktoob), and the Philippines (Friendster).

Apparently, Alexa already thinks that Facebook is larger than MySpace in the United States. And Maybe it is, or maybe Cosenza’s isn’t using the best data. But I love being able to visualize market dominance on acountry-by-country basis. I wonder what the map would look like using comScore data, some of which can be found in our recent social network valuation model.

Below is an interactive version of the map.

We’ve now remodeled social network valuations based on current user numbers and Facebook’s most recent $10 billion valuation. The results are dramatically different.

Based on the original year-old model, if Facebook was worth $15 billion (their then-current valuation), MySpace, with far more U.S. users, was worth nearly $20 billion:

Our model takes Comscore data for available countries and regions. We’ve graphed each of 26 well known social networks with the data we have been able to collect. We’ve then calculated the average advertising spend (estimated by PriceWaterhouseCoopers in a recent report) for each person online in each of those countries. For example, in the U.S., the total 2008 estimated Internet advertising spend is $25.2 billion. We’ve divided that by the number of people online in the U.S. according to Comscore (191 million), to get an average Internet spend per person of $132. View the raw data and calculations here.

The U.S., by the way, is only the 4th most valuable market per Internet user, trailing The UK ($213), Australia ($148) and Denmark ($144).

We’ve then multiplied the average Internet spend per user in each market with the number of unique users each social network has in that market, essentially creating a “weighted average” based on the advertising dollars chasing users. If a social network has more users in the U.S., Japan, the UK, Germany, Australia, and other bigger advertising networks, they will have a higher weighted average valuation.

We believe this model is an effective way to rank various competing social networks. It bumps down networks like Orkut and Friendster who have tens of millions of users in markets with very little advertising spend, and bumps up networks with lots of users in higher value markets.

Based on this model, MySpace is by far the most valuable social network. Second place Facebook has just 75% of the value of MySpace (even though it now has more users), followed by Bebo (26% of MySpace value), Hi5 and Amebio. LinkedIn comes in at no. 11, at 6% of MySpace’s value.

The new model takes into account the dramatic rise of Facebook usage over the last year, the massive recent decline in MySpace usage, and less dramatic changes in the other social networks. We’ve also modeled out the various valuations with the old Bebo ($850 million) and LinkedIn ($1 billion) valuations as pivot points. We’ve also added Twitter to the list just for kicks.

The bottom line: If Facebook is worth $10 billion today, MySpace is worth just $6.5 billion. Bebo is worth $1.8 billion, Twitter is worth $1.7 billion and LinkedIn is worth $0.8 billion. Facebook also accounts for 37% of all social networking value points in our model. Another way of saying this: If Facebook is worth $10 billion, the value of the entire social networking industry is $27.1 billion.

Lots of charts and graphs below. The full model is here if you want to look at all the data (I recommend zooming unless you have super vision). Thanks to TechCrunch intern Dan Romero for running the new model.

Social network hi5 is launching an instant messaging service, hi5 IM, adding real-time interaction for users. hi5 IM, which is similar to Facebook Chat, Facebook’s instant messaging feature, shows users which friends within their network are online and runs directly in any hi5 user’s browser. In addition to one-on-one chat, users can change their status, write updates, post profile comments, and share photos through hi5 IM.

It appears that the social network is looking to amp its “entertainment features” to gain more users and is also focusing on engaging users though casual gaming and micro-payments. Hi5 also recently partnered with Paymo to power mobile payments for virtual goods. The social network is hoping that real-time chat will compliment casual games, and interaction with other content on the social network.

hi5 IM also enables users to share and express their emotions through animated hi5 “star” emoticons. The star, derived from the hi5 logo, represents a variety of virtual gestures and emotions, such as sad, happy, laughing, crying, playing dead, angry and shy. Last month, the self-described “world’s leading social entertainment web site,” got a new CEO, Bill Gossman, formerly the CEO of the online advertising service Audience Science. And at the end of March, the social network hi5 cut a large percentage of its staff following the failure of a new round of funding to materialize.

With nearly 60 million active users, hi5 has a good sized audience, but it’s long been far behind the big boys in the social networking space, MySpace and Facebook. Facebook is the most popular social network worldwide with 294.7 million unique visitors, with MySpace coming in second with 125.7 million unique visitors. hi5 gets about 63 million monthly unique visits worldwide but only 3.7 million of those are from the U.S., according to ComScore’s March stats. And a good chunk of ts audience is in countries where it is hard to attract advertisers,

Two of PlaySpan’s payment solutions will be used (PayByCash and Ultimate Game Card), getting the most out of the variety of payment methods used across the globe, which is essential for hi5 since the large majority of its users are located outside the U.S (about 40% speaks Spanish, for example). The company’s subsidiary PayByCash is able to support approximately 80 payment methods in 180 countries and boasts an extremely low fraud rate, and the addition of hi5 to its customer reference list further validates the alternative micro-payment platform.

Hi5 will also offer its subscriber base the ability to buy and use PlaySpan’s Ultimate Game Card, a pre-paid game card available for purchase online and in more than 21,000 retail stores across the U.S. and Canada (and apparently soon expanding to other countries).

For actual transactions on the social network, the company continues to bet on hi5 Coins (which can now be paid with using PayByCash), a virtual currency it launched late last year, which I’ve personally always considered a strange move considering it requires users to get accustomed to using a currency that can’t be used for anything else outside of the network while standard ‘gift credits’ seem to work just as well.

Either way, the company is clearly trying to ramp up its revenue streams, recently launching a casual gaming section which hi5 said would prove very important for making money in the long run, and partnering with Paymo to power mobile payments for virtual goods. The partnership with PlaySpan once again shows that monetization through anything but advertising is the key focus over at hi5, and recent reports show that that may be the best strategy worth pursuing.

You may remember Habbo, which we reported pulled in $74 million in revenues last year, mostly from virtual goods, or the market analysis on Chinese social networks, whose business models have long relied mostly on sales of virtual gifts rather than online advertising. Expect to see more of these reports in the future.

Finally, it’s also worth noting that hi5 has been on a cost-cutting spree, recently slashing an estimated 50% of its workforce.

Global mobile payments network Paymo and social network hi5 have partnered to let members in 24 countries use their mobile phones to purchase hi5 Coins, hi5’s virtual currency. Countries where Paymo will be made available to hi5 users include the U.S., Canada, France, Hong Kong, Thailand, Russia and Colombia.

Paymo’s mobile payment system doesn’t require users to have a credit card or bank account. Users enter their cell phone number on the site, reply to a Paymo text message and then all virtual charges on hi5 are automatically charged to the user’s monthly cell phone bill. It’s pretty easy and similar to UK mobile payments service, Zong. Paymo says that over 75 percent of the online community worldwide does not have a credit card but 3 billion consumers own a mobile phone. With that in mind, the company is hoping their system, which avoids credit cards or bank accounts, will take off.

Unlike some of its competitors, such as Zong and Mobillcash, whose systems are limited to certain regional areas, Paymo can be accessed in 45 markets around the globe, enabling mobile payments in Europe, North and South America, the Middle East, Africa and Asia. Paymo recently expanded service in the U.S. after striking deals with mobile carriers AT&T, T-Mobile and Virgin Mobile to allow users to make online purchases using their phone.

Mobile payment systems are gaining traction from social networks, but the issue of costly fees charged by mobile carriers to the payment systems (which are then passed on to the consumer) remains a serious problem. Paymo says that it typically charges users a transaction fee of 10% of the purchase price. The company adds that different cell phone carriers charge varying fees but most are in a range of 20% to 40% of the purchase price, which is a pretty large amount in transaction fees. As we said in our earlier analysis, this could pose a significant roadblock to these types of services, which channel user payments through mobile carriers. It appears that it would be hard to sustain these fees in the long term when transaction charges could be drastically decreased if payment networks accepted credit card or bank account payments. Still, with such a vast coverage area of the world, Paymo appears to be ahead of some of the more regional services. Paymo says that Facebook, which has a widespread international following, would be the next partner it hopes to land in the social network space.

Like many others, Triana Global claims to have been one of the first ad networks that started focussing on monetizing facebook applications after the social networking service started opening up for outside developers with the launch of Facebook Platform back in May 2007. Its biggest competitors are Adknowledge (which recently picked up both Cubics and Lookery Ads), Social Media, Offerpal Media and Appssavvy.

The service has managed to stay largely under the radar since its launch, and even when they started guaranteeing floor CPM rates of $0.15 and $0.08 CPC rates on standard banner sizes for new developers joining the network they seem to have gotten the silence treatment and were also downright criticized for developing their own Facebook apps besides acting as a social advertising network. It didn’t help that Triana Global claimed to have hundreds of applications in their network, which they later expanded to other social networks like MySpace, hi5 and Bebo, but never published a portfolio or customer reference list.

Either way, apparently the company was acquired by ShopIt in October 2008, and that startup is now relaunching the service as ShopIt Media, essentially providing a way for their users (1 million according to the company) to market the products they have for sale across a multitude of social communities. New publishers are being wooed with a 80% revenue share for all campaigns on Facebook, Ning, MySpace, hi5, Bebo and Orkut that are kicked off in February.

The social networking service says hi5 Games will become an important part of its monetization strategy, with the help of their recently launched virtual currency that allows members to buy virtual gifts using real money in a digital form (still with us?). Users will eventually be able to utilize the virtual currency, called hi5 Coins, for direct transactions such as premium content, advanced gaming features and status upgrades. Hi5 is also experimenting with “new and immersive” advertising options on hi5 Games, which it says will allow brands to better engage their target audience.

Hi5 has recently laid off a good portion of its staff but continues to be a very relevant player in the social networking field; it is still the third largest social network after Facebook and MySpace according to Comscore.

What were the top social media sites of 2008? ComScore came out with its worldwide traffic stats for November a few days ago (so these don’t include December). They are a mix of social networks and blogging platforms. Blogger, the orange line in the chart above, still rules the roost with an estimated 222 million unique worldwide visitors in November (up 44 percent from November, 2007). Facebook, the blue line, is on pace to pass it soon with 200 million unique visitors (up 116 percent). (Note, though, that this is more than the 140 million active users Facebook itself reports—go figure). MySpace is pretty steady at 126 million uniques. WordPress is a close fourth and gaining with 114 million (up 68 percent). And Windows Live Spaces is down 22 percent to 87 million uniques.

ComScore keeps a list of what it calls “social networking” sites, but these include blogging platforms and other social media sites as well. While the audience for blogs is still showing healthy growth overall, Facebook stands out as the social gorilla taking share from not only other social networks but blogs and other social media as well.

Below are the top 20 sites on comScore’s social networking list. It is really more of a social media site list, which is what I’m renaming it for this post. It is not definitive, but it gives a good lay of the land. (Here is a similar ranking from 2007). Note on this list the stubborn persistence of Yahoo’s Geocities at No. 6, the rise of Yahoo’s Flickr at No. 7, Six Apart at No. 10, and the presences of Chinese sites like Baidu Space and 56.com. The real surprise, though, is document-sharing site Scribd at No. 16, with nearly 24 million worldwide uniques.

Top Social Media Sites (ranked by unique worldwide visitors November, 2008; comScore)

1. Blogger (222 million)
2. Facebook (200 million)
3. MySpace (126 million)
4. WordPress (114 million)
5. Windows Live Spaces (87 million)
6. Yahoo Geocities (69 million)
7. Flickr (64 million)
8. hi5 (58 million)
9. Orkut (46 million)
10. Six Apart (46 million)
11. Baidu Space (40 million)
12. Friendster (31 million)
13. 56.com (29 million)
14. Webs.com (24 million)
15. Bebo (24 million)
16. Scribd (23 million)
17. Lycos Tripod (23 million)
18. Tagged (22 million)
19. imeem (22 million)
20. Netlog (21 million)

Here’s a screenshot of the actual data (as you can see, I rounded above):

Social networks need to find a way to make money fast. Online advertising never really worked well on social networks in the first place, and with online advertising feeling the same pressure as everything else in the economy, new sources of revenue must be found. Internationally-oriented social network hi5 is turning to virtual gifts, which can be bought with virtual coins that members buy with real money. Members can buy virtual gifts for about a dollar each and send them through hi5 to their friends (both real and virtual).

True to its international reach, hi5 is taking a multi-culti approach to virtual gifts. They include a Mexican Rosca cake, a dreidel, and a steamed pork bun. Don’t ask me what culture values rocks or finds cats in cups to be tasty (see below). Each virtual gift costs 80 coins, or about $1.

Hi5 is claiming to be the “first major social network to launch its own virtual currency.” But Facebook has been selling virtual gifts for a long time, even though CEO Mark Zuckerberg won’t talk about how much they are bringing in. Each virtual gift on Facebook also costs $1, and you buy them with 100 gift credits. Facebook’s gift credits are no different than hi5 coins, other than they are not as shiny. They perform the exact same function.

In the future, however, hi5 members will be able to buy other “premium goods and services” with their coins.

The layoffs keep rolling in. The latest startup to cut back is Hi5, the third largest social network. But you wouldn’t know it from reading the company’s blog, which touts some positive press coverage today:

During a down economy, things are looking up for hi5. Today hi5 was featured in Fortune.com, soon to arrive on news stands.

Yet on Monday, the 110-person company laid off 10 to 15 percent of its employees in what it is calling a “restructuring” move. A tipster told us that the cuts came mostly in Design, HR, and QA. I called to ask for a comment and Hi5′s VP of marketing Mike Trigg confirms:

We did a restructuring this week. We did let a few people go, but we are also hiring people.

The world changed for everybody dramatically last week. We are focused on growing our business. We have great momentum.

Trigg says Hi5 should not be lumped in with other startups that are cutting back right now in order to lower their burn rate and survive longer. With openings that the company is still trying to fill, he says the net effect on headcount will be close to neutral.

Hi5′s growth actually has flattened to around 56 million unique visitors worldwide, according to comScore (August figures). But it is still the third largest social network after Facebook and MySpace.