Russian Firm Plays Web 2.0 Roulette With LiveJournal Buy

Two years after a merger that helped herald the coming blogging revolution, Six Apart has agreed to sell its LiveJournal counterpart to a Russian media company.

LiveJournal had already been operating a Russian-language version through a partnership with the buyer, a firm called "SUP." Terms of the deal were not disclosed, but Six Apart said the proceeds would be used to beef up its core blogging platform.

Like rival blog tools, LiveJournal offers users the chance to start and maintain Web-based journals for free. It has an estimated 14.3 million blog accounts and gets 20 million visitors per month.

Expanding the Market

SUP will create a San Francisco-based company, known as "LiveJournal," to run the blogging company's worldwide operations, it said.

Six Apart had bought LiveJournal in 2005, acquiring it from founder Brad Fitzpatrick -- who created the software while a student at the University of Washington six years earlier. That acquisition came about a year after Google (Nasdaq: GOOG) bought Blogger from Pyra Labs, signaling the growing importance of social media, which has developed into today's frothy market for social networking companies.

Six Apart will now turn its focus to expanding the market for its own three blogging offerings, noted CEO Chris Alden -- the Movable Type blog software, the TypePad blog hosting service and Vox, a service meant to enable less technical Web users get into the blogosphere.

Going Global

In the two-plus years it was owned by Six Apart, LiveJournal grew from 5 million worldwide accounts to its current level of more than 14 million and also added a host of new features, including its own e-mail client, instant messaging and mobile capabilities.

Part of that growth has come in Russia while Six Apart was working with SUP as a strategic partner to create a native language version of the platform. LiveJournal has grown rapidly in that country, where Internet use is booming as the country catches up with more developed nations in terms of technology use.

"We have been impressed by the expertise and enthusiasm that SUP has brought to LiveJournal in Russia. They've introduced new features, nearly doubled the number of users, invested in key product enhancements, and have done justice to one of the most innovative online social networks in the world," Alden said.

"We see enormous potential in developing the business worldwide," noted Andrew Paulson, the chief executive officer of SUP. SUP will create a board of advisers to represent user interests as the platform evolves. "It has already shown its durability in America. We believe this is a great opportunity."

Six Apart will continue to provide some support functions to LiveJournal, including advertising services.

Another Shoe?

Six Apart itself has been mentioned as a likely acquisition target, particularly because its blogging tools for businesses, including Movable Type, are extremely successful. In late 2005, Yahoo (Nasdaq: YHOO) began using Six Apart's software to offer blogging capabilities to its small business hosting customers.

Yahoo would do well to acquire a company such as Six Apart since some of its own blogging tools lag rival's offerings, Sterling Market Intelligence analyst Greg Sterling told the E-Commerce Times. Even Ask.com owns a dedicated blogging tool, having bought Bloglines early in 2005.

A strong blogging platform would have broad implications for both social networking and advertising, particularly in the poised-to-grow local search marketplace, he added. Google underscored the value of social media when it recently bought the micro-blogging platform Jaiku, Sterling noted, which promises to accelerate the extension of the blogging phenomenon to mobile devices.

LiveJournal is already the fourth most popular personal blogging site among U.S. users, trailing social networking giant MySpace, Google's Blogger and Yahoo 360, according to market research firm Hitwise.

What drives LiveJournal's popularity is the way it works with other social networking sites through the OpenID standard, which enables users to sign in once and publish blog posts to several such sites.

There may well be more consolidation to come. Published reports last month suggested Automattic, the owner of the WordPress blog tool, was mulling a takeover offer from an unnamed bidder. Automattic has not commented on the reports.

Business Blogging Tools

Six Apart may be best served by devoting its resources -- it has received nearly US$30 million in venture capital to date -- toward its business blogging tools, given the expected growth in that area, said Forrester Research analyst Charlene Li.

"Corporations are starting to adopt Web 2.0 tools and they want solid technology that can be integrated into their existing networks," she told the E-Commerce Times.

Just as instant messaging began as a consumer phenomenon and is rapidly gaining acceptance as a collaboration tool within businesses, blogs likewise are being adopted by enterprises. Software and platforms that consider business needs, such as heightened security and built-in compliance controls, will have the most success in the enterprise setting, Li added.