Friday, June 24, 2011

BW: The Rise and Inglorious Fall of Myspace

The fall of MySpace over the past 3-4 years has been stunning in nature, probably only rivaled by that of Yahoo (YHOO) mid decade.  Both were usurped by a competitor who has become a household name - in MySpace's case we are speaking of Facebook, while Yahoo was taken out by Google (GOOG).   BusinessWeek's cover story details the rise and fall of MySpace who 4 years ago was the dominant social network.

  • At its December 2008 peak, Myspace attracted 75.9 million monthly unique visitors in the U.S., according to ComScore. By May of this year that number had dropped to 34.8 million. Over the past two years, Myspace has lost, on average, more than a million U.S. users a month
  • Because Myspace makes nearly all its money from advertising, the exodus has a direct correlation to its revenue. In 2009 the site brought in $470 million in advertising dollars, according to EMarketer. In 2011, it's projected to generate $184 million
  • In February, News Corp. (NWS), which bought Myspace and its parent company, Intermix, in 2005 for $580 million, started officially looking for a potential buyer at an asking price of $100 million, according to a person familiar with the sale process. Yet even in the midst of a frenzy for social media that has seen LinkedIn (LNKD) valued at $6.4 billion ... barely anyone wants to buy Myspace.
  • Mismanagement, a flawed merger, and countless strategic blunders have accelerated Myspace's fall from being one of the most popular websites on earth—one that promised to redefine music, politics, dating, and pop culture—to an afterthought. But Myspace's fate may not be an anomaly. It turns out that fast-moving technology, fickle user behavior, and swirling public perception are an extremely volatile mix. 
  • Interviews with more than a dozen former Myspace and News Corp. insiders reveal how a rocky six-year marriage ultimately undercut Myspace's once-dominant social media position, leaving the field wide open for Facebook's rise and potentially squandering billions of dollars of future revenue along the way. According to two former News Corp. executives, Murdoch, who was initially enamored of his new digital plaything, lost interest in Myspace as his pursuit of the Wall Street Journal, which News Corp. bought in 2007, consumed his attention.
  • While developers at Facebook, Tumblr, and Twitter—startups backed by venture capital—were more free to design their products without the immediate pressure of advertising goals, Myspace managers had to hit quarterly revenue targets. That pressure increased dramatically in the summer of 2006, when Google paid $300 million a year for three years to be the exclusive search-engine provider on Myspace on the condition that the social network hit a series of escalating traffic numbers.  In retrospect, DeWolfe says, the imperative to monetize the site stunted its evolution: "When we did the Google deal, we basically doubled the ads on our site," making it more cluttered. The size, quality, and placement of ads became another source of tension with News Corp., according to DeWolfe and another executive. "Remember the rotten teeth ad?" DeWolfe says. "And the weight-loss ads that would show a stomach bulging over a pair of pants?"

Jeez... even in this story on social networking Detroit takes a beating!
  • Myspace's inability to build an effective spam filter exacerbated the public impression that it was seedy. And that, says Boyd, contributed to an exodus of white, middle-class kids to the supposedly safer haven of Facebook—a movement she compares to the "white flight" from American cities in the second half of the 20th century. Myspace was becoming Detroit.

[Jun 16, 2009: MySpace Axes 30% of Staff - News Corp (NWS)]

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