The Rise and Fall of MySpace.

Introduction

Over the last decade or so, social media has exploded and become a part of our daily lives and changed the way business is conducted around the world. In the early 2000’s, when social media was in its infancy, and just after the dot-com boom, a company named Friendster penetrated the industry, followed by MySpace and finally FaceBook. They all had something in common, they were platforms for social media and interaction, however, all of them either went on to prosper, be bought out or died a slow death on the vine. This white paper will examine what happened and why.

Was it reasonable for Facebook to ignore part of the market during its infancy?

Facebook, or “The FaceBook,” as it was first named was created by Mark Zuckerburg during his time at Harvard in 2004. During this time, MySpace was the biggest company in an emerging and changing social media industry. FaceBook didn’t ignore part of the market during its infancy. Remember why it was created?

“Facebook was created by college students for other college students, and only in September 2006 did it become open to all Internet users: kids, students, young adults, and adults.” (Shamia, 2007) So Facebook didn’t really ignore it, instead, it really wasn’t even looking at it. When it did finally penetrate the market, it quickly began to capture large swaths of market share and even began stealing it from MySpace.

Friendster turned down a $30M acquisition offer and MySpace accepted one for $580M how did these decisions hamper their ability to compete with Facebook?

One took the money and the other did not and held out thinking it was the only dominant player in the industry. So why did neither course of action help either company become more dominant than Facebook?

Friendster simply did not know what it had nor how to capitalize on its success. Subsequently, when a newer, cooler thing i.e. MySpace came along, people simply stopped using it and it died a slow death on the business vine.

MySpace, on the other hand, took an offer for $580M, a wise thing, but failed to capitalize on several key problems within its platform, that Facebook did not. Firstly, Myspace failed to restrict user’s ability to customize their profiles; this exposed them to multiple security holes that lead to hacking and spamming. (IBT Time Reporter, 2011)

Secondly, advertising on MySpace cluttered its pages, whereas Facebook’s didn’t, and users liked Facebook’s layout more and slowly merged over to it instead. Lastly, MySpace’s strategic failure was its platform was “meet your friends, versus, Facebook’s meet new friends.”

Should they have taken the money? And how do you know, as a company, when to take the money?

Hindsight is always 20/20; just about any businessperson will say “they both should have taken the money!” Some will point out that when Friendster didn’t take an offer for its acquisition, it failed to capitalize on its growth, and place, within a dynamically changing industry.

Yes, it was the first to market, but that didn’t mean it could maintain its position and stay there. MySpace, on the other hand, took the money, yet still failed within the industry. So it comes down to asking a few key questions of yourself (the owner) and/or other company members. “Do I have a viable business model? If not, is there one on the horizon? If yes, is it one I can tolerate? Do I have an A+ team? Can I recruit one? Can I afford them? Could a sale solve my problems?” (Harrison, 2013)

It is my belief that Friendster’s founder/founders simply didn’t have the understanding or experience to see what Social Media was becoming and could be. MySpace, on the other hand, did understand its possibilities but failed to understand its platforms problems and gave it away slowly over time to Facebook.

MySpace later become known as the Social Media site for music, could it build a highly profitable business around this niche?

Simply put, No! MySpace lost its mojo with savvy young users early and once gone it’s almost unrecoverable. The brilliance of FaceBook was Zuckerburg allowed it to go wherever the market wanted it to. “Facebook pushed its tech folks to make it happen.  And they kept listening.  And looking within the comments for what would be the next application – the next promotion – the next revision that would lead to more uses, more users and more growth.” (Hartung, 2011)

The new word that was created in the business world was White Space management. No rules. No plans. No forecasting markets. Instead, it was about reading, listening, adding, adding, adding, more and more of what users wanted. MySpace was run by corporate hacks who sat around Wall Street and investment firms looking at from and ROI point of view. Facebook listened and changed almost hourly.

The chart below shows just when the change occurred and how Facebook grew and MySpace never recovered.   Remember, Justin Timberlake recently purchased ownership in MySpace, and announced “huge changes” were going to bring back MySpace as the predominant music niche platform. That was four years ago and nothing has happened. To say MySpace is dead and gone would be putting it mildly.

facebook-vs-myspace-visitors

Conclusion

Social Media has evolved rapidly in the last decade or so, with three key participants that have either, come, gone or managed to stay. The free market and nature of social media has changed business and particularly the business of being the Social Media platform, which Facebook has become. The question now is, how long will Facebook manage to stay in the market for, and can it sustain growth and competition?

References

Hartung, A. (2011, January 13). How Facebook Beat MySpace – Forbes. Retrieved from http://www.forbes.com/sites/adamhartung/2011/01/14/why-facebook-beat-myspace/

IB Times Staff reporter. (2011, July 18). Social Network Food Chain: Friendster, MySpace, Facebook, Google+ and Next? Retrieved from http://www.ibtimes.com/social-network-food-chain-friendster-myspace-facebook-google-next-299697

Harrison, K. (2013, December 13). How Do You Know When It Is Time To Sell Your Company? – Forbes. Retrieved from http://www.forbes.com/sites/kateharrison/2013/12/13/how-do-you-know-when-it-is-time-to-sell-your-company/

Shamia08, G. (2007, November 8). Facebook, Market Segmentation And a Discussion Mark Zuckerberg Never Had | Gadi Shamia [Web log post]. Retrieved from http://gadishamia.com/2007/11/08/facebook-market-segmentation-and-a-discussion-mark-zuckerberg-never-had/

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