Europe media groups need social networks: investor

PARIS (Reuters) - Traditional European media companies expert in selling advertising should snap up online groups such as social networks aggressively to gain audience and an international outlook, a leading Internet investor said.

"New audiences are not in newspapers or on TV or radio. They're online and on mobile and in social media companies," said Saul Klein, a partner at Europe's top Internet venture capital firm, Index Ventures.

European firms had to start competing with U.S. groups for deals that would combine their ad sales forces with the huge audiences on social networks, Klein told the Reuters Technology, Media and Telecoms summit in Paris on Wednesday.

"There are social media networks that have come from nowhere in the last three to four years that have built enormous audiences," he said.

"But without a sales force you're just not going to generate significant revenues and explain to advertisers what the opportunities are."

Klein cited the recent purchase of one of Britain's most popular social networks, Bebo, by Time Warner Inc's AOL Internet division for $850 million as an example of a recent deal involving a U.S. buyer.

Other examples such as eBay's purchase of Internet telephony firm Skype, developed in Estonia, and the deal by CBS to buy Web music and social network site Last.fm highlighted a similar trend of U.S. companies buying European start-ups.

Index Ventures were financial backers of both Skype and Last.fm.

MISSING AUDIENCE

"The point when Bebo got acquired was just when they were starting to show monetization and AOL has a sales force that has been selling online ads for 15 years," he said. "What they were missing was the audience.

"(You can see this also in CBS) and their acquisition strategy. They did it with Last.fm and they've just acquired (Web media group) CNet. (CBS) have said we've got a killer sales force and some branded content but what we need is audience and an outlet for our content."

Bebo claims to have around 40 million global users while Fox Interactive Media, which owns the world's largest online social network, MySpace, had 88 million unique users in March, according to data from comScore.

Klein said U.S. firms tended to be much more aggressive about building international media businesses. But with technology start-ups appearing all over the world and increasingly in eastern Europe, there was no reason other media groups could not get in on the act.

Britain's biggest broadcaster, ITV, has bought the Friends Reunited Web site and Vodafone Group bought a social network firm called ZYB from Denmark last week. But the big deals are coming from the U.S.

"If you look at the top 10 Web sites in every country across the world today compared to five years ago, there will be one that you had never previously heard of," Klein said.

"And it's not like people go to these sites once a month, they go back day after day and they spend a lot of time on them. That time is eating into print, TV and radio and so if you're in one of those sectors and you want a business still in five years time you have to invest online."

(For summit blog: summitnotebook.reuters.com/)

(Editing by James Regan)