19/09 Social networking - A nightclub on your smartphone

Sep 19th 2011, 17:44 by L.S.

A BIG fridge full of drinks, comfy chairs, even a Jacuzzi—Badoo’s new digs in a top floor office in Soho in central London feel as if the firm is trying too hard to resemble a Silicon Valley start-up. Yet when it comes to business, Badoo is certainly no wannabe. It has a shot at becoming one of Europe’s leading internet firms.

What makes the firm so promising is that it seems to have discovered a new “space”, as digital cognoscenti call a big new market. If social networks such as Facebook are about keeping in touch with friends, and online-dating sites about finding a long-term relationship, Badoo is about something in between: meeting people spontaneously. Some call it “nightclub-as-a-service”. 

When users sign up, they upload photos of themselves and provide such details as age, sex and interests. Other users can discover them based on this information as well as by browsing the photos. Originally the service was only available on the web, but the firm now also offers applications on Facebook and for smartphones. The mobile application, for instance, lets users adjust how widely they fancy casting their net. If they set the dial to one mile, say, and find somebody they would like to meet, they can strike up an online chat and then get together.

Even more intriguing is how Badoo makes money. The basic service is free. But if users want to increase the chances of being discovered, they can pay £1.50 ($2.36) or a similar amount in their country’s currency to rise to the top of the list. Their ranking drops as others put down money—which can create somewhat of a bidding war for the top slots. Users can also take out a subscription for £5, which gives them “super powers”, such as being able to view others’ profiles anonymously. 

Without any marketing, Badoo has managed to become one of the most popular online meeting services worldwide. It is available in 35 languages and boasts 124m registered users—a number that is growing by about 125,000 a day. Its Facebook application has more than 16.4m monthly active users, making it one of the most popular applications on the social network. And although only about 5% of users pay, the firm claims to be on its way of exceeding $100m in annual revenues.

Yet to become a true gold mine Badoo has to crack the English-speaking markets. So far its users are concentrated in southern Europe and South America. This may be because Andrey Andreev, the firm’s founder, after having created three start-ups in Russia, launched Badoo in Spain, from where it spread virally to France, Portugal, Brazil and Mexico. But people in English-speaking countries may also be culturally less inclined to use such a service, in which case Badoo’s growth prospects would be limited. 

What is more, the barriers to others entering Badoo’s market are quite low. At least in markets where the service has not yet attracted a critical mass of users, others could easily copy the service. And as every nightclub owner can attest, even the most popular establishment can quickly fall out of fashion. At least on Facebook, Badoo seems to have peaked. In March its number of monthly active users had reached 68m (though this may be the result of changes to the firm’s Facebook application).

Another challenge for Badoo is not to turn from a nightclub into a bordello. Professionals are known to have used the service and quite a few users appear only out for a one-night stand—although these seem to be a minority. Should this happen, Badoo would become a much less valuable property because sleazy online services, even if they are highly profitable, generally find it almost impossible to go public. To keep its service clean, Badoo immediately terminates accounts of known prostitutes and employs 350 “moderators” around the world to make sure that no pornographic pictures are among the 2m photos which existing and new users upload daily.

As with successful Silicon Valley start-ups, Badoo must regularly deny that it is gearing up for a public listing or about to get an injection of venture capital with a high valuation (so far the only outside investors are Finam, a Russian technology fund, and some undisclosed private individuals). But the firm is clearly setting itself up to move to the next stage: not only did it hire a new chief executive, but also a chief financial officer and a marketing executive. Which allows Mr Andreev to focus on improving the product, the new office—and thinking about his next start-up.