Office Crashers: $15M Reinvigorates Tagged, a Social Network For The "Time Rich"

By Kym McNicholas , written on August 22, 2012

From The News Desk

Of course, I had to check out what the San Francisco Business Times deemed as one of the top places in the Bay Area to work. But there was another, even bigger reason I decided to visit social networking site Tagged. The Financial District-based "Social Discovery" company seems to be growing silently amidst the skyscrapers, despite a five year old misstep that it hasn't been able to live down.

Every time I mention the name Tagged to Silicon Valley investors and entrepreneurs, they cringe and immediately accuse CEO Greg Tseng and his co-founder Johanne Schleier-Smith of bad business practices. Why?

Well, for one, they were accused of deceptive email practices at Jumpstart's online matchmaking service, Crushlink, which they started while at Harvard.

Secondly, Tagged, which they created in 2004, ended up being accused of asking its members for access to their email accounts and then spamming their friends.That was in 2007.

Then, even after the deceptive email practices were brought to the forefront, the social networking site was accused of doing it again. To which, Tagged claims was a "glitch." Silicon Valley was skeptical.

Tagged's management has apologized, changed its practices, and settled class action lawsuits three years ago. The company's kept its nose clean every since. And Tagged's membership hasn't suffered at all. In fact, it's been continuing to grow despite the controversy. So, why are we continuing to hold their feet to the fire here in Silicon Valley?

I say "we," because I not only grilled CEO Greg Tseng on camera while on a retreat in January during my time working at Forbes, but I also brought up the issue again in the above video. I had asked on my Facebook page last week, what insiders wanted me to address, and this was the only question I got over and over again. I'm not sure if the company will ever live down its reputation in the Valley, because people here just don't seem to care that much about what it does well -- they only care if it does something wrong.

But this is not because Tagged is not a viable company with real growth prospects. It's because Silicon Valley is not the company's target audience. The Valley is a community of the "time poor." We're always on-the-go. If we're not working, we're networking. If we're not networking, we're innovating. Tagged targets the "time rich." As a social discovery site, it's a place where users spend a lot of time meeting other people, chatting, and playing games together online. Who has time for that here? So, because we largely don't use the site, we think, "It can't possibly be of value."

Some would argue differently.

Investors are showing faith in Tagged, which is ranked as the eighth most popular social networking site in the US, according to eBizMBA. The company just raised $15 million in growth financing from Lighthouse Partners and Comerica Bank. Growth financing doesn't come easy. It's not supported by collateral such as inventory. Companies must have solid financials because it requires regular monthly principal and interest payments. Tagged is going on its fifth consecutive year in the black, growing revenue by 35 percent to more than $43 million in 2011.

The company plans to use the funds to make more acquisitions. In 2011 it acquired hi5, along with Digsby, TopicMarks, and WeGame. The high level goal is to secure 300 million more users and while Tagged isn't releasing its current membership numbers, eBizMBA guesstimates it has 20.5 million Unique Monthly Visitors -- a far cry from Facebook's nearly 750 million.

Facebook is a competitor, but Tagged sees itself fitting more into the emerging social discovery space versus social networking. In other words, it's more about meeting new people, whether to date, find a new friend, play an online game, discover a new product, or uncover a new idea.The scary thing for investors and for Tagged's users is that social discovery is certainly not private.

The most effective companies in this space must dig a little deeper into their users' profiles and rolodex, because they needs lots and lots and lots of information to help figure out how to create the most personalized, targeted experiences for them. As Tagged tries to scale fast, It'll certainly raise a few red flags because of its past. Going forward, you can guarantee we'll all be watching.

Tagged will have to make sure that, as it continues to grow and improve user experiences, it continues to give its members the ability to share as much or as little information as they choose. It can learn certain lessons of what not to do from Facebook, as the world's largest social networking site has time and time again tested members' boundaries with rash terms of service and privacy changes.

Consumers must have a choice. The key to success for Tagged therefore, is to do what it takes to make users feel secure, while still delivering all the benefits social discovery has to offer.