PARIS (Reuters) - French media group Lagardere (LAGA.PA) has little faith in the marketing potential or the rocketing valuations of global social networking sites due to the way they have fragmented the audience for advertisers.
“There is no clear business model because you have a huge, massive audience, but it is not a marketing community,” Lagardere’s Chief Financial Officer Dominique D’Hinnin told the Reuters Global Technology, Media and Telecoms summit in Paris.
“You can put some ads on the first page but then people would be spread over 10,000 pages with very thin audiences at the end of the day. It is very difficult to market that to advertisers.”
D’Hinnin said MySpace, part of Rupert Murdoch’s News Corp. NWSa.N, Google’s (GOOG.O) YouTube in the United States, video sharing site Daily Motion and Skyblog in France had no clear business model or coherent view on what would be the success story in the years to come.
“YouTube don’t know yet how to market such a business even if with Google they have the best partner possible,” he said.
The CFO said there were three main business models attracting interest; building Web sites based on content, buying search engines and community-based, social networking sites.
He said Lagardere was focused on the first, could not afford the second and was very wary of the third because of the lack of strategic clarity and the associated sky-high valuations.
“There is a bubble there — so when you have a question mark about the business model and a huge figure about the valuation it is not exactly what we like,” D’Hinnin said.
“We are not ready to buy MySpace or YouTube,” noting they were in any case not for sale. “I don’t want to mention the names that are for sale,” he said, adding that Skyblog was a perfect example of a company Lagardere was not interested in.
“It is not our business model,” D’Hinnin said.
Skyblog’s co-founder and chief executive Pierre Bellanger told Reuters on Monday it was exploring tie-up talks with global media and Internet giants such as Google (GOOG.O) to accelerate its growth beyond Europe.
Bellanger declined to specifically identify the companies Skyblog was talking to, but said the so-called ‘GYM’ companies — Google, Yahoo and Microsoft (MSFT.O) — would work well.
D’Hinnin said Lagardere was also wary of social networking sites because of their inherent volatility.
“It is fine if you launch the activity and you better sell it, but you don’t want to be the buyer,” D’Hinnin said.