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Summary:

With a recession raging and the advertising market in a slump, the social networks have to figure out business models — fast. For MySpace it could mean capturing the music niche. Others will find their niches. Facebook will leverage its Facebook Connect. Regardless, one thing is for sure, the era of general purpose, broad social networking is coming to a close.

Murdochs & MySpacers Tom Anderson & Chris DeWolfe in Happier Days. (Photo via Flickr courtesy of Oxfam America)

The legendary New York Yankees catcher Yogi Berra is rumored to have said about a restaurant: “Nobody goes there anymore because it’s too crowded.” That is precisely how I feel about MySpace, which apparently has a lot of visitors, especially in the U.S., where it is marginally ahead of Facebook, but no one I know actually uses it.

Things are only going to get tougher — Google’s deal with News Corp is going to end soon, and with it a steady spigot of cash will be turned off for a service that is struggling to grow revenues. Like an ’80s rock band, MySpace’s time has come and gone. And nothing reflects that more than the exits of MySpace CEO Chris DeWolfe and his long-time cohort, President Tom Anderson. DeWolfe ran the company from 2003, helped sell it to News Corp for $580 million in 2005 and later helped negotiate a $900 million advertising deal with Google. Since then, MySpace has lost its buzz to Facebook (which is in turn losing that buzz to Twitter). It attempted to become an app platform, but that hasn’t worked out as well. Being a media entrepreneur, I have religiously studied Rupert Murdoch’s career. At the first sign of diminishing returns, Murdoch puts a media entity up for sale, and tries to swap his tin mine for one producing gold. He tried to do that when he attempted to pawn off MySpace to Yahoo.

The clock has been ticking on MySpace and its executives. Earlier this year, COO Amit Kapur and two other long-time MySpace employees left the company because they couldn’t get the contracts they wanted. Their exit was spun by News Corp. After reading various accounts of DeWolfe’s exit, you can see they left Chris out to dry — something I find particularly distasteful.

Regardless of his exit, there is a strategy in place that could turn MySpace into a decent enough money maker: MySpace Music. By looking to social network’s musical roots, MySpace executives realized that they could build the MTV of the broadband generation. Combining text, audio, video, and social abilities with its audience, MySpace can thrive as a niche yet lucrative musical destination. A lot has to go right for that to happen, though. I have outlined a long list of reservations about MySpace Music.

Back in November 2008, Kevin Kelleher noted, “Social networks spent too much time trying to build audiences without building a solid business model.” With a recession raging and the advertising market in a slump, the social networks have to figure out business models — fast. For MySpace it could mean capturing music industry dollars. MySpace wouldn’t be the first social network looking for niche riches. Hi5, a San Francisco-based social network that’s popular outside of the U.S., recently cut half of its workforce and is said to be pivoting into becoming a social gaming destination. Others are going to soon follow. Folks, what we are seeing is an end of general purpose, broad social networking.

Finally, after nearly two years of us saying so, social is now simply part of the web fabric. Facebook founder Mark Zuckerberg recognized that and since then has been pushing hard on Facebook Connect, which is a simple authentication method that also allows granular social interactions to be embedded in non-Facebook services. With over 200 million Facebookers, Mark has somewhat of a future.

DeWolfe should take this unceremonious exit as a blessing in disguise. Or as Yogi would say, “It gets late early around here…”

  1. Wonder if Paris Hilton will continue to date Chris after this.

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  2. Twitter will take an effect on many of the social networks. Many still don’t understand it, they will soon.

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    1. Simon how do you suppose that is going to happen?

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    2. Count me as one of those who doesn’t understand. How can Twitter supplant the social identity replication serviced by a social network?

      Twitter is a content publishing service that, due to the liberty of its usage, has been applied by early adopters as a method of communication, like e-mail. A social identity is much more encompassing than that.

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  3. As a musician with 2,500+ Friends on MySpace, I’m happy that Facebook and Twitter are taking so much of the mundane stuff off of MySpace. Personally, I have no interest in Facebook or Twitter because they don’t have musician pages, so if all the non music fans go there, fine by me. Making MySpace even more music/media oriented sounds great.

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    1. Angus

      Given that you are a musician, what are the many things you would like to have them do in order to make it even more useful to folks like yourself. Being a non-musician, I thought it would be good to get your perspective.

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    2. Really? No music pages?

      Imogen Heap, Trent Reznor, ACDC, Britany Spears, and many others are on twitter.

      http://thelistenerd.com/2008/12/29/musicians-who-twitter/

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      1. Sorry netik but I think the place of musicians on Twitter compared to their presence on Myspace is drastically different.

        I feel that they go hand in hand to compliment each other (twitter+myspace) as far as music goes.

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  4. Niche music community sites such as http://iwastheremusic.com are also making a mark now a days. I completely agree with OM here that MySpace has to go musical way to survive. Finally beginning of end of big sites without business models.

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  5. So glad someone (besides Yogi) is finally catching on to the Wisdom of the Language.

    See also: http://gaggle.info/miscellaneous/articles/wisdom-of-the-language

    :) nmw

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  6. “Nobody goes there anymore because it’s too crowded”

    Will happen to Facebook too. And I refuse to use any of these lame Social-Networks.
    Facebook will be dead in 5 years, less if we are lucky.

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  7. In media time and again the “specific always drive out the general.” Here we see it in social networking. I have contended that there are truly riches in niches. I am a fan of social media and I am pulling for MySpace to make this happen. This wont be the easiest path as they have lived off the fat of the Google deal for some time. They need to move quickly…while not turning away their base. Not easy to do. I am hoping MySpace can pull it off.

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    1. Jeff

      You are right. I think the Google deal may have brought them the money but delayed their push into finding a sustainable business model. Let’s see if they can make the transition back to being a music only service happen.

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  8. I don’t think I’ve met one Myspace detractor who didn’t modify their disdain with a comment on its value as a band portal. I think it could be the next MP3.com. :D

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  9. I believe social networks will continue to rise. They will continue to make changes and updates to their sites to keep up with the rising social network sites. The social media rampage is a big boost for social networks, giving the insight of interactivity abilities within social networks. At http://determined2.com Interactivity that promotes successful pursuit of life goals. Social media concept is here to stay, and I feel will even grow larger.

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  10. Nice post Om very solid analysis on the what’s happening. I concur with you on MySpace. Time for a reboot and picking an area to build a real business on is the right move. As you know I’ve been playing with searchme.com and some other social stuff. What MySpace could do is really take the lead in providing relevant user centric products – i agree music is a no brainer to start with.. i would integrate searchme.com as a default search due to the killer visual rendering tech they built.. nothing would be cooler than browsing profile pages in a visual way like searchme does it.

    Other than that I say they need to get the business rolling in terms of providing a better service for users that ties in revenue immediately.

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