Forgetting Facebook: How Tagged.com Found Space in Social Networking

The social network Tagged was founded in the same year as Facebook. When it realized it wouldn't win that fight, it made a bold decision: stop competing. What happened next wasn't always pretty--but lately it's been profitable.

Tagged.com, the social network whose Android app soft-launched last week, was founded in 2004, back when most of us hadn't even heard of a little Harvard startup called Facebook. "We spent three years fighting to be king," recalls Greg Tseng, Tagged's founder and CEO. "By 2007, it became clear that we weren't going to win. So we decided to pivot, to become a site for meeting new people," he explains. "Thank God we did that. The other sites," ones like Hi5 and MySpace, "are getting crushed, are declining, whereas we've built our business over the last three years." Tagged, meanwhile, has over 100 million registered users, and on Monday, announced it had brought in $32 million in revenue last year, its third consecutive profitable year.

The idea behind Tagged is that the Internet should enable you to meet new people, to forge new connections, rather than simply replicating an existing social structure online. "There are literally quadrillions of possible connections, pairs of people," out of the 2 billion people who are online," notes Tseng. "But most aren't viable, won't work, or aren't mutually interesting connections." Tagged uses algorithms to foster interesting connections. It supports three "use cases," in Tseng's terminology: romance, social games, and common interests.

Tagged

This makes Tagged something like three sites at the same time: it's Match.com (for love), Yahoo Games (for play), and Meetup (for common interests), rolled into one. Is Tagged biting off more than it can chew? Tseng doesn't see it that way. He thinks Tagged, if it refines the algorithms for social discovery, can become the platform for other sites.

"Something like Chatroulette should have launched on Tagged," he says. "They had all these problems with relevance, with filtering. Those are things we can power as a platform." With that in mind, in the coming year Tseng wagers the company will likely make at least one acquisition.

One interesting aspect to all this are the unanticipated ways Tagged has grown. Games are popular on Tagged--but not the same sorts of games that are popular on Facebook. Farming games aren't huge on Tagged; rather, the most popular game is one called Pets.

"You can buy, sell, own, and trade other Tagged members as your pets," Tseng explains. "Every action you take involves someone else, often someone you don't know. A common use case is, if you want to get to know someone you'll 'buy' them, or buy their pet away from them." By treating Tagged members themselves as the objects of the game, it forms as a nice ice-breaker.

Also unexpected were some of Tagged's demographic features. It's bigger in the U.S. mountain regions than on the coasts. It's big in Malaysia. It skews African-American ("three to four times over index over the population," says Tseng) as well as Hispanic (two times over index, in that case). "I can't really explain that," says Tseng.

Not everyone loves Tagged, though. Its email promotion practices brought it under fire in recent years. Users who signed up for the site occasionally found themselves inadvertently spamming their entire contacts list. This happened to a Time magazine writer, who thereby dubbed Tagged "the world's most annoying website." In the summer of 2009, New York Attorney General Andrew Cuomo went after Tagged, saying that the site "raided email address books, stole identities, and spammed millions of Americans." In November of that year, Tagged settled with Cuomo's office, paying a fine of half a million dollars. As recently as February of last year, Tagged was still mopping up after itself.

"Tagged resolved allegations from the AG in an amicable manner," Tagged PR person Peter Evers says. "To avoid issues in the future they instituted a number of new and improved mechanisms to avoid a repeat."

Still, it's a checkered history. Tagged was wise to bow out of the battle against Facebook in 2007, and to redefine what the company was about. But in the wake of its recent wrangles with Cuomo and others, it will need to prove it's wrestled with its own demons if it wants to become the comprehensive social discovery platform Tseng envisions.