Classmates.com, which was hoping to cash in on the social networking phenomenon by filing for an initial public offering, said today it is stopping the effort because of unfavorable market conditions.
Classmates Media, which has offices in Renton, runs the long-standing Web sites that connect alumni in schools across the country, as well as military personnel and employees in different workplaces. Classmates is owned by Woodland Hills, Calif.-based United Online.
Although it can be argued that Classmates was very early to the social networking game, it seems it didn't fully leverage its large community of members, but acted more like a directory of students that's useful especially when it came to planning reunions.
In a release, Classmates said: "United Online has determined that proceeding with the initial public offering under current market conditions would not be in the best interests of its stockholders."
The company filed for the IPO in August, saying it wanted to raise as much as $125 million. United Online estimates that it will have to record costs related to canceling the filing of up to $5.5 million during the fourth quarter.
The question is whether Classmate's withdrawal is a sign of an unfavorable market for social networking, or if Classmates just doesn't stack up against other companies?
According to the Associated Press, users spend significantly more time on MySpace and Facebook than on Classmates.com. In fact, the average visitor spent about 8.3 minutes on Classmates.com in October, compared with 195.6 minutes on Facebook.com and 192.9 minutes on MySpace.com, according to comScore Media Metrix.
And Facebook had no problem selling 1.6 percent of its company to Microsoft for $240 million -- a figure that gives the company a market worth of $15 billion.