Deal Radar 2008: Slide

Slide, founded in 2005, is Max Levchin’s second baby. Levchin, founder of PayPal, sold the online payment site to eBay for $1.5 billion, and he intends to do even better with his current venture, Slide. Slide, however, doesn’t look like a great second act to me!

Slide is an application that allows users to share photos and videos through products like FunWall, SuperPoke and Slideshows, on popular social networks like Facebook, Friendster, Hi5 and Bebo. The applications have allowed users to add frills to their posts on various networking sites. In mid 2007, Slide introduced advertising through its applications on sites which carry these widgets, thus allowing advertisers a far wider reach. This provides advertisers with a different approach from regular banner ads, which people are now more accustomed to tuning out. Reach is the name of the widget game. Some of Slide’s bigger advertisers are AT&T Wireless, Activision, Paramount Pictures, Discovery Channel and Lionsgate Films.

Slide boasts some impressive data. One million new Slide widgets are created every day and are being viewed by more than 144 million unique viewers every month. The company’s main competitors are other widget-makers, one of them being RockYou.

Initially self-funded, Slide received backing from Mayfield Fund, Blue Run Ventures, Khosla Ventures and Founders Fund worth $20 million, sources say. The details of its funding are largely undisclosed. In its last round of funding earlier this year, Slide managed to raise $50 million from big Wall Street players like Fidelity Investments and T. Rowe Price. This latest round of funding raises the company’s valuation to over $500 million. For a widget-maker, that seems huge.

So what is going on in terms of monetization? Shutterfly’s CEO Jeff Housenbold says, “A lot of people are using Slide.com. That is phenomenal user activity, but the last I heard is that from 77 million users they have $300,000 in revenue.”

The issue with Slide.com is business model and valuation. In the online photo sharing business, there are a few proven business models: storage, print, merchandising, and photo books. Slide doesn’t seem to be using any of these, instead going for an advertising model, which is not exactly yielding revenue at the same rate. It stores only thumbnails, so even if it wanted to print or merchandise I don’t think that would be viable, or else I would have said that a simple partnership with Shutterfly would take care of monetization problems.

So, if revenue is so low, and even if it is $5-$10 million, to justify a $500 million valuation, it is simply not adequate. Some suckers, it seems, are pouring money into this venture at astronomical valuations, without any idea of how this turns into a business. And those suckers included some of the blue-chip names in Silicon Valley venture capital.

Utterly exasperating!

This segment is a part in the series : Deal Radar 2008