Exit One, Enter Another

This week contained a milestone in the decline of one once-dominant social networking website and the birth of another one hoping to someday be king.  Those events were (i) the sale of MySpace for 35 million dollars and (ii) the announcement of the Google+  public preview.  Obviously, Google+ hopes to someday do to Facebook what Facebook did to MySpace, which is also what MySpace did to Friendster, GeoCities, and others.  The interesting question is whether there is anything to be learned from MySpace’s fall from the top that might indicate whether Google might finally succeed.  After all, Google has failed in its attempts at social features  such as Google Wave and Google Buzz.

First s0me numbers on the MySpace deal.  Internet advertising agency Specific Media paid 35 million dollars.  As part of the deal, News Corp. laid off half of the 450 employees remaining after its prior employee reductions.  When News Corp. bought the site in 2005, MySpace was described by the financial adviser fairness opinion as representing $323 million of the $580 million deal.  When the sellers first sought bidders for the site, the reserve price was $100 million.  In short, the decline in the market value of MySpace is as astounding, especially since the private stock purchases value Facebook at $70 billion.

Oddly enough, this chart from Business Weekillustrates what ought to be a key indicator of MySpace’s value – the number of unique visitors per day.  This statistic has not declined anywhere near as much as the value in MySpace declined.  I also suggests that Facebook should not be worth two thousand times as much as MySpace.  Thus, the first lesson is that metrics are not as important as public opinion about who has the cool, hip, and growing site.  MySpace clearly is on the decline and Facebook on the ascendancy, but the bigger decline is perceptual.

Since MySpace clearly once had the image of being the place to be, what changed?  Was it simply that Facebook did everything right or did MySpace contribute to its own demise?  Or to put it another way, can Google overcome Facebook on their own or would Facebook have to stumble in some way?  I will refer the question to an expert:

We’ve got to admit that during the last two or three years, I think we made some big mistakes.

News Corp. CEO Rupert Murdoch during a May 2010 earnings call responding to a question regarding MySpace.

Unfortunately for News Corp., by then the damage to MySpace’s image proved to be unsalvageable.  But what really were those mistakes?  Perhaps a neighborhood analogy is the best way to explain because, to a member of a social network site, their page is their home online.

  1. They want their home to look nice
  2. They want their neighborhood to look nice
  3. They want enjoyable things to do there
  4. They want the streets to feel safe.

If those things don’t happen, they will want to move their home someplace else.

From the standpoint of wanting your home to took nice, one of the first mistakes that MySpace did was not be selective enough about the permitted advertizing on the site.  Somebody could go to their own page and see an ad showing gross corroded teeth, an obscenely obese torso, or a product of clearly dubious value.  Of course, visitors knew that it was MySpace’s advertisement, but it felt like somebody put a billboard for an strip club over their house.  It wasn’t their billboard, but it made them want to move.

From the standpoint of wanting your neighbors to look nice, the next mistake seems almost counter-intuitive.  For a while, MySpace allowed too much user customization.  The problem is that many users made truly hideous designs.  If you need a reminder of how bad some of them could be click here unless you are epileptic.  Imagine having to admit that you were actually friends with someone with such terrible tastes.  It makes you want to move to a place where, even if your friends are not classy, they at least don’t show it.

From the standpoint of wanting there to be interesting things to do, MySpace tried to develop everything themselves.  In contrast, Facebook releases a development kit so that enterprising folks could add capabilities.  And so you wind up with, for example, Farmville by Zynga and numerous other innovations.  By the time MySpace introduced a development kit, it was too late.

Finally there is the standpoint of wanting the streets to be safe.  Beginning with some highly visible stories of young people being sexually victimized, to the Connecticut Attorney General’s investigation, to the eventual removal of 90,000 registered sex offenders from its rolls, MySpace reacted too slow.  The fact that the audience in this famous SNL skit was on to the premise of the joke right from the start was not a good sign. Once they did take the worries about predators seriously enough, it was such a major problem as to be a distraction from keeping pace with Facebook’s new capabilities.

So while MySpace was looking more and more like ‘the bad part of town’, Facebook was looking more like a planned suburban community.  The houses may look a lot alike, but they looked neat and safe and filled with college students.  It was like being part of Harvard without paying for the tuition.

Can Google+ do the same?  Continuing with our neighborhood analogy, Google+ is, at least for the moment, intentionally creating a gated community.  Only a limited number of people are being being given a limited number of invitations that they can give out.  For a while, Google was accepting requests to become one of those limited number of people and then abruptly shut it down because response was too high.  Really?  The Googleplex was brought to its knees by a request form? Just about nobody really takes that story at face value.

Its a tactic that Google has successfully employed before.  The invite system for the preview version of Gmail gave a sense of exclusivity, with users telling people how lucky they were to have gotten one of the invites.  At the time, Gmail itself was little different from any of a number of then current web-based e-mail systems.

Will simply creating the impression of a gated community be enough for Google+ to steal the spotlight?  Not by itself, particularly since Google eventually will need to open it to the wide public.  But it is a clever start.  Much like the early version of Gmail didn’t really have anything compared to Hotmail, so does Google+ have no killer feature over Facebook. Google’s promotional materials for the new service made prominent mention of the ‘corcles’ way of organizing your contacts.  However, except for the name and visual appearance, the feature is no different from creating contacts groups.  So before Google takes this new social site out of limited release and into full competition, they will need to find some additional compelling differences.  But at least Google is one of the few companies that were not put off by Facebook’s market cap.

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