The Social Network Facebook Can't Beat

FriendFinder's adult angle offers some safety from rivals Over the years, Facebook has been a relentless competitor. It has crushed tough rivals like MySpace and Friendstar. But Facebook has also contained the Internet giants like Google (Nasdaq:GOOG) and Microsoft (Nasdaq:MSFT). Now the social network has 700 million active users and a market value of over $80 billion (according to the latest trades on [view link]). Within a year, the company is expected to have a public offering which is likely to be historic. Yet there is an area of social networking that Facebook really can't venture into: adult entertainment. Basically, the company needs to have a brand-friendly environment to capture a growing share of online advertising. Let's face it, this is a big busines that forces the question: is there a way for investors to play the adult-entertainment angle for social networking? There is — the company is FriendFinder Networks (NYSE:FFN). Based in Silicon Valley, it operates various sites that allow men and women to, well, connect. Some of the brands include [view link], [view link], [view link], [view link], [view link], [view link] and [view link]. Features include chat, instant messaging, video sharing and blogs. FriendFinder became came public about a month ago at an offering price of $10. Unfortunately, the stock plunged and is now fetching $5.80. But with its first quarterly report as a public company, FriendFinder was able to show some momentum. Adjusted pretax earnings increased 33.3% to$27.2 million. And the company continues to launch new sites. True, FriendFinder has substantial debt, coming to $543.5 million. But with its cash flows, it has been continuing to pay the amount down. The IPO was also a big help. FriendFinder has more than 200 million unique monthly users that come to its sites and there are more than 1 million paid users. Keep in mind that these figures are larger than for those at LinkedIn (NYSE:LNKD), which has a market value of $7.35 billion. FriendFinder's market cap is a mere $50 million. Of course, FriendFinder isn't for everyone, and it's probably too taboo for many investors – and still risky, in light of its small market cap. But it's certainly a social-networking play and has good assets. More importantly, it won't have to worry about Facebook or LinkedIn. [view link]