Answer the following questions and/or statements in detail:
1. Was it reasonable for Facebook to initially ignore a segment of its market when MySpace was so big and Facebook so small? Use credible sources to support and explain.
2. Friendster turned down a $30 million acquisition offer, and MySpace accepted one for $580 million. Both decisions are considered to have hampered their ability to compete with Facebook. Why? Use credible sources to support and explain.
3. Should they have taken the money? When and how do you know it's time to sell? Use credible sources to support and explain.
4. MySpace later became known as the social networking site for music and entertainment connections. Do you think it can build a highly profitable business around this niche still with the advent of Facebook and other entrants into the marketplace? Explain in detail and support your answers using sources of research. Use credible sources to support and explain.
1000 words
Case Study Social Status: The Rise and Fall of MySpace
How does a company that has established clear market dominance keep ahead in a rapidly changing field? When your current customers and business model depend on one model, how do you respond as competitors introduce new business models? It’s one of the toughest questions facing entrepreneurial companies, and sometimes even the biggest, most well-funded aren’t immune from the challenge.
The rise and fall of the MySpace empire took only six years to play out.
Ultimately, the same business strategy that drove it to the top of the social networking world led directly to its failure.
Prior to MySpace, the first social networking site to really prove the power of harnessing individuals’ own social circles was Friendster. Launched in 2002, Friendster was based primarily in Asia and was backed by some of the leading venture capital firms in the world. It quickly became a powerhouse, and Google offered to buy it for $30 million in 2003. Friendster turned the offer down. Meanwhile, MySpace quickly began challenging Friendster. Still a relatively early entrant in the new social networking market space, by 2004 it overtook Friendster, and by 2005 MySpace was considered the world’s top social network program. News Corporation acquired MySpace for $580 million that year, 1 expecting it to generate more than $1 billion in annual revenue. 2 At first, things looked good for MySpace. At the time of its acquisition,
MySpace was the fifth-ranked Web domain in terms of page views (putting it in the league of Web giants Yahoo!, Google, and AOL),3 it had five times the traffic of Facebook,4 and by 2006 it outranked Google as the most visited website in the United States and had acquired its 100 millionth member.5 That year, MySpace inked a $900 million advertising deal with Google. It was the social network, valued at an astonishing $12 billion in its heyday.6 The prospects seemed limitless.
MySpace was so powerful that Friendster, based in Kuala Lumpur, increasingly focused its growth in Asia, pulling back on its presence in the United States.
Yet MySpace wasn’t watching the competitive and strategic landscape carefully.
Because MySpace was easily open to all—anyone could join, and there were few privacy controls—it faced criticism on a number of fronts, including
1. “News Corporation to Acquire Intermix Media, Inc.” News Corporation. July 18, 2005.
2. “Special Report: How News Corp got lost in MySpace,” by Adegoke Yinka. Reuters.com. April 7, 2011.
3. “News Corporation to Acquire Intermix Media, Inc.”
4. “The Network Effect: Facebook, LinkedIn, Twitter & Tumblr Reach New Heights in May,” by Andrew Lipsman. The ComScore Blog. June 15, 2011.
5. “MySpace Signs 100 Millionth Member,” by Mark Sweeney. The Guardian. Aug. 9, 2006.
6. “MySpace loses 10 million users in a month,” by Emma Barnett. Telegraph.co.uk. March 24, 2011. online privacy, child safety, censorship, and website performance.
MySpace’s inability to build an effective spam filter made it seem eedy, driving away members and advertisers.
7. Meanwhile, the strength of upstart Facebook was growing. Facebook’s initial model allowed only those who were connected to a college or university to join. At first, these were only Ivy League universities, giving the social media site an air of exclusivity. Later, members had to have a “.edu” email address, enabling Facebook to capture the highly valuable college market. By 2009, Facebook had surpassed MySpace’s traffic. Meanwhile, MySpace was locked into an advertising revenue deal with Google that limited its flexibility and ability to innovate and compete.
8. Rather than attempt to address all the technological and cultural Web issues plaguing the MySpace platform, News Corp. chose to focus on generating revenues by increasing its identity as an entertainment-centric Web destination and by forging even closer relationships with the recorded music and movie industries. After all, News Corp. owned many media properties. On a site that already was lagging behind the social aspect of the overall social network, this decision to move away from connecting people with people in favor of connecting people with media proved disastrous. At a time when Facebook and Twitter were experiencing meteoric increases in membership, MySpace’s membership numbers as well as its traffic dwindled.
Despite numerous rounds of management shakeups between 2008 and 2010, none of the would-be executive saviors of MySpace managed to turn the company around. By the end of 2010, MySpace had no defensible competitive advantage. It had long ago defined its niche as a place for music fans and bands to connect, and had decided to stick with this core competency despite evidence that the social media universe was quickly evolving in another direction altogether. It also ignored complaints from its members that the technology was falling behind, and that the features and user interface were substandard to the newer social networks appearing almost monthly. MySpace management ran the company without adapting sufficiently, or smartly enough, to these two particular challenges.
In 2011, MySpace was sold to Specific Media and Justin Timberlake,9 where it may be in better hands. Although just a shadow of its former self, it remains one of the top 160 most-visited websites in the world,10 which gives its new owners a foundation to rethink and perhaps reinvent this once-giant social networking and technology innovator.