Daily Strength, a health social networking site that likes to boast about the number of communities it hosts (regardless of the number of actual active members it has), has been sold to an international corporation called HSW International. Never heard of them? Nor had I:
HSW International, Inc., an online publishing company, develops and operates Internet businesses that are focused on providing consumers with digital content database [sic]. It primarily focuses on the online publishing of localized and translated Chinese and Brazilian editions of the HSW Internet site [specifically, they provide two foreign language versions of the HowStuffWorks.com website]. The company operates a Brazilian Internet Web site, hsw.uol.com.br, which has approximately 3,500 articles, including articles from the HSW content database translated from English to Portuguese, and originally created content in Portuguese. In addition, it plans to offer a library of digital content, including originally authored content and the content acquired from third parties for the company’s use and for licensing to various customers.
HSWI is a publicly traded company with a market cap of around $26 million. It was trading at between $6 and $8/share since its inception, but has been particularly hard hit by the economic recession and has been recently trading in the $0.30 – $0.40 range. This appears to be a bit of an odd combination, given that Daily Strength had no prior strong international presence and that HSWI doesn’t operate any other social networking websites.
Daily Strength closed on a $5.3 million round of Series A funding in May 2007, after an undisclosed amount of initial funding came from angel investors in 2006 to get the company going. Not surprising in this market, HSWI only paid $3.125 million upfront for Daily Strength, with another $3.525 million earnout payable if the website continues to meet some page view targets over the next few years. Traffic to the site has been largely stagnant during 2008, however, so they may have difficulty meeting aggressive projected growth curves. (Of course, the easiest way for a social networking site to increase page views is to break up a page that you used to be able to view on one page into two or more.)
Although this may be a disappointment to Daily Strength’s investors, who might be lucky to get out what they put into the company, it should be a semi-positive sign for others in this space. Apparently health social networking sites do have some value, just not the kind of value that a Facebook-like site would command.