Only last year hi5 was forced to downsize almost half of its staff to compensate for its inability to raise new cash. Industry watchers feared that hi5, founded by Ramu Yalamanchi in 2003, was already a spent force. But their fears turned out to be baseless when social network hi5 announced yesterday that it has raised $14 million in a new round of funding led by Crosslink Capital. This remarkable turnaround of fortune comes after first its venture round of $20 million in July 2007, bringing the total funding to just over $34 million.
Over the last year and a half, hi5 has already taken a number of initiatives to gain substantial ground in social games; it introduced virtual goods in December 2008 by launching its hi5 Coins virtual currency and a virtual gifts store. Last spring, it entered into a partnership with Mochi Media to boost the number of games on its platform. It has also created a Games channel for the social network in February 2009 and Stars animated avatars in last October. It also employed gaming pioneer Alex St. John, the former CEO of casual gamer Wild Tangent, as its president and CTO last fall. The company, which is remodeling its site to cater to the gaming industry, has recently acquired gaming startup Big Six.
This raised amount comes as hi5 for the firm, who will be spending the funding to further bolster its social gaming and virtual goods expansion plans. This is no small amount, but it’s a pittance compared to what market leader Facebook has raised. As of now hi5 has 60 million users globally, while Facebook has grown faster than hi5, with approximately 600million users. But its new-found interest reflects a pragmatic change of guard in hi5’s stance. Now hi5 does not want to take on Facebook in the social networking arena, and instead are to compete as a social gaming network. By doing this, it has a very good chance of setting itself as an alternative for social game companies as it very well knows that dreams of unseating Facebook from the top slot would only be too far fetched.
hi5 is currently available in more than 50 languages. Other than social games the site also features a global virtual currency supporting over 60 payment methods and 30 currencies worldwide. Going forward, the San Francisco Company’s strategy is simple: Providing an alternative platform for social games companies and eat into Facebook’s social games share as much as possible.