I remember sitting at my desk in New York when News Corporation announced that it would acquire powerhouse social networking site MySpace.com for $580m in cash. The move was heralded by many as a savvy reinforcement of News Corp by Rupert Murdoch, giving his old-line media firm of movies, newspapers, and tz stations and solid foothold in the digital entertainment space.
At the time, I thought that Murdoch was making a wise move. Remember though, this was in mid 2006, before the ascent of Facebook, and before the leadership of MySpace and their News Corp. overlords ran the company into the ground.
Fast forward: It may have seemed like a good deal at the time. Now, it’s early 2010 and I don’t think I have logged into my MySpace account for well over a year, perhaps even two years; I cannot remember, because it has been so long. Facebook now permeates the public consciousness, oftern being one of the first websites people visit at the start of their day. Indeed, many people simply leave it open in their browser window, refreshing it constantly so that they can see and respond to the live updates posted by their friends. With its gorgeous, clean, well-designed user interface, and much less advertising, I don’t think MySpace ever stood a chance. The rush to Facebook by many was breathtaking and unstoppable. The execs at Fox Interactive Media must have been fighting back panic, but did not choose to recognize the incredible value offered by Facebook and the obvious flaws in their own product.
Where MySpace failed and Facebook succeeded is a question of differing views on who the purpose of their product. It is obvious that managers at MySpace viewed effective monetization of their surging web traffic as a core business strategy. They must have thought to themselves, “With the ad revenue we will realize from this new web property, we can add X to the bottom line of News Corp.” Not long after the deal, the $900m ad deal MySpace signed with Google, the increase in advertising on the site was evident and contributed to a tolerable, but unpleasant user experience defined by ubiquitous ads, ugly design and lots of prostitutes.
Facebook, on the other hand, turned down astronomical buyout offers and made profitability a secondary concern as it focused of providing users with a pleasant forum to interact with individuals whom they choose to. All business decisions were secondary to user experience and providing enjoyable features. The stratospheric acquisition of users over the past few years validates this strategy. Only now, after becoming one of the most trafficked websites in the world, has Facebook become profitable. Mark Zuckerberg and other senior leaders at FB should be commended for their long-term vision and commitment to providing a quality product above all else.
Now, we learn that Oven Van Natta, a former senior Facebook executive brought in to save MySpace has been dismissed after nine months on the job. In January 2009, ComScore reported that Facebook drew twice the global internet traffic that MySpace has. The company’s fall back strategy of becoming an online hub for music (given MySpace’s popularity as a forum for upcoming musicians) resulted in the purchase of online music networks iLike.com and Imeem under Van Natta’s tenure. Infighting among management and incoherent strategy have resulted in the company falling short in their ad deal with Google, producing a $100m loss.
Its a tough lesson in not being to greedy and focusing on what your customers want. Facebook, the social network the burned through investor cash and endured widespread criticism for not taking buyout offers, is triumphant.
MySpace chief executive resigns (LA Times)
UPDATE: News Corp Sees 2010 Oper Earnings Rising In Low 20% (WSJ)
Google Crashes Facebook IPO Party (The Street)
No comments:
Post a Comment