Bigger Than Google, MySpace is different

32 Comments

Robert Young, earlier this year, explained to my readers why Rupert Murdoch really bought MySpace for $583 million. He argued that we should wait for Rupert to launch a record label and a music channel that takes on MTV and knocks it off its top spot. Well today, both those things happened. Young has decided to update story, and has written a stirring post, that reminds Murdoch’s men to not get blinded by the Hollywood Bright Lights, or else they ruin the carefully woven fabric of My Space community. This is not the first time he has argued for handling the community with velvet gloves.

Guest Column by Robert Young

Mike Masnick over at Techdirt posted an interesting observation about Rupert Murdoch’s MySpace earlier today. And I’m glad he did because, coincidently, I was in the process of writing a piece on a related topic. While Mike questions the validity of MySpace’s popularity (in terms of pageviews), versus the revenues they are able to generate, my post will focus on the challenge that they face on the revenue side, regardless of pageviews and ad inventory.

Like all community sites that rely mostly on their users to author content, MySpace has had a very difficult time trying to secure high advertising rates. Historically, advertisers have held little trust in content that is not tightly controlled editorially and, therefore, the value they are willing to attach for ads placed next to such uncontrollable content has been very low. The result is clear… MySpace ranks higher than Google in terms of pageviews, but Google will gross $6 billion in revenues this year, while MySpace will generate about $30 million. The delta, which can be measured in orders of magnitude, is almost unbelievable. I realize the comparison is not directly apples to apples, but even so!

I bring this up because this is where Murdoch’s strategic opportunity lies… in eliminating that gap. Put another way, MySpace has a multi-billion dollar opportunity to exploit, which promises to break News Corp out of the media stock depression that it and all its fellow conglomerates have been suffering. Success on this front will demonstrate that News Corp can tap into the fastest growing segment of the advertising industry in a manner that befits Google and Yahoo!

But why would advertisers change their tune and all of a sudden attach higher value to community sites and user-authored content? One word… blogs. Blogs are proving themselves to be a powerful new medium, one that challenges traditional media for people’s time and attention. When an advertiser buys ads on Google and it gets distributed on the AdSense network, many of them are placed on blogs, without discrimination as to who authored the content. This dynamic is something new… advertisers gave up some control (where the ad is placed) in return for higher accountability. Put simply, Google changed the game, and now News Corp’s MySpace (and all other community services) can benefit.

I bring this up for another reason… with the recent news that MySpace is launching its own record label as well as the rumors that they will also start a film studio, I hope the MySpace guys aren’t getting too caught up in the bright Hollywood lights. As many know, in Hollywood, you’re either a somebody, a nobody, or you’re one of the King’s (Murdoch’s) men. It’s very easy to get blinded (e.g. worrying about a regular table at The Ivy or the studio lot commissary) and to lose focus on the fundamentals and strategic priorities. Wall Street is watching , and it is my belief that News Corp’s second entry into the Internet will be judged first and foremost on their ability to close the monetization gap between MySpace and Google, and less on their ability to venture into traditional Hollywood businesses.

Don’t get me wrong, I’m not saying that launching a label and studio is a bad thing, it’s just that such ventures won’t get the Internet multiples that the media giants are looking for.

Robert Young is a serial entrepreneur who is currently focused on www.weedshare.com, a P2P-enabling “superdistribution” digital media service. Previously, he was an exec at Delphi Internet Services (which he sold to Rupert Murdoch’s News Corp.), and founder/ceo of Freemark Communications (where he led the invention of free email and pay-per-click advertising).

32 Comments

sidius

Is it true that Rupert has a way to allow employers and whomever else pays a supposidly tidy sum
to view ALL myspace.com pages, no matter who you are?
If so, where can a person go to pay the “sum” and obtain the information?
This is a argument that’s been running around here, and so I am very curious about this!

myspace

Myspace will be having a music channel comming out and i feel that they will have a battle of the bands or a reality show on music artist for a new myspace music hannel to gain the money back from the social networking site.

Matteo La Rosa

I don’t think that Myspace will have a world resonance as Google has. It is quite strictly a USA phenomenon; it began with young people, but now, on my point of view, is not enough focused (or, better, ‘niched’) on one topic.
I personally do not find even readable the Myspace’s contents, yes, it has a lot of people viewing its pages, and it’s remarkable, but I personally do not think it will last a lot.
A lot of Social networks 3.0 are going on and on my point of view these are far more remarkable than Myspace.
Let’s see if the story will give me reason or not. ;)

gale

It comes down to understanding the clarity with which Murdoch sees markets.

MySpace Idiocy Strikes America”>myspace
has certain functionalities and attractions for a certain market. Google makes other people’s soul sing.

Strategically, no one is likely to eliminate the gap. The consumer base is simply too different, and trying to target two completely different markets has never made great business sense.

Yes there will be huge overlap, but the best business sense lies in focusing first and foremost on one market for one business, and not trying to muddle the waters by serving two masters

Ticketwood

This is a topic that is near and dear to me so I went the next step and blogged a thesis about what this means for community sites in general (as businesses) and a suggested strategy for navigating the road ahead.

myspace

I guess they want more Rumor has it that myspace is coming out with a better version of there site on another domain starting march 1st it will be another social networking website with alot more features. I guess to stay ahead of other sites coming out like myspace.com also i heard it will be http://www.FriendWise.com i guess well just have to see if that happens.

personals

WOW $583 Mil i just can’t see how they will make money with the site i just can’t see it being that profitable just from the Ads they have on there nothing personal but i see the site being sold again in the near future … Remember Murdoch once owned the dodgers.

sparta

I’ve been on MySpace and its nothing even as close to TagWorld.For one MySpace was not as friendly “I think” as TagWorld.MySpace had a lot of (stereo typing) within their own moderators.I thought I would try the website and found it was a biased website.

Karie

I’m not sure at all about what makes more money or has more pageviews. In reality I could care less. The thing you guys don’t realize is Myspace is sort of like a family. It’s almost all about Music. That is why 90 percet of the people i know is on there.

It’s the place to promote bands. I have even seen some bands take down websites and only have Myspace pages. It’s being used for soundtracks to shows, movies. and also to find the newest talent.

A record label and such are a good idea but I think it would be too wordly known and no longer be fun because it would change. I enjoy the smallness of the site and do not want it to change…

Markus

20% of people who visit google click on a link when going to the next page. So the pageview per user ratio is extremely low. On myspace about 1 in 20,000 pageviews will result in a click.

Every 20,000 pageviews on google will result in 4,000 clicks to advertisers sites. Every 20,000 pageviews on myspace will result in a click to a adverter. If you are advertising who are you going to spend your money with?

justin

if myspace becomes one of those sought after .com website’s it’s only going to become less popular… the more people that like something, the more drawn out it becomes, and fades away over time like any other fad. which in my opinion is exactly what myspace is… a fad

Robert Young

Mark, just read your follow-up to my post on your blog… I like! Your concept of syndicating out community in open fashion is intriguing. Hmmm…

And Jesse, I share your surprise about the pageview ranking of MySpace. That said, I can certainly attest to the stickiness of such sites (especially when catering to the younger demo). Even if they don’t truly outrank Google, the fact that they are in the ballpark is still an incredible accomplishment IMO.

Jesse Kopelman

“I think the data is from comScore…Remember MySpace a very very sticky site (that too for the 16-25 demographic) and even if each of its 35 million or so users visit 10 pages a day its more than Google’s PageView’s”

Anyone who uses Google as there primary search engine easily clicks on 10 links a day and I think there are more than 35 million such users . . .

Mark Sigal

Hi Robert,

First off, excellent post. I was able to parse through the fact that your post was not intended to be an apples-to-apples comparison but rather to suggest a changing of the rules for securing ad dollars and asserting that the 99.5 cent spread per ad dollar between the Google page view and the MySpace page view is poised to shrink if News Corporation stays focused and executes.

This is a topic that is near and dear to me so I went the next step and blogged a thesis about what this means for community sites in general (as businesses) and a suggested strategy for navigating the road ahead.

It is called, “Mega brands, online communities and ‘three walled’ gardens,” and can be found at the following URL: http://thenetworkgarden.blogs.com/weblog/2005/11/mega_brands_onl.html

If interested in such things, check it out.

Mark

Malcolm

I work as a media buyer in online advertising.

Millions of people go to the Google.com site and search from there. MySpace consists of thousands of blogs – different pages on different topics.

Advertisers look for areas where they can find large numbers of particular people. The fact that you must register to be on MySpace means many of the impressions MySpaces see are from people who are logged into the site. This means they will be able to target advertising based on a number of different metrics.

Targeting is usually based on Age and Gender , but we’ve recently been seeing companies offering much higher levels of targeting. I’ve recently bought media targeting 18-30 males with an interest in technology who earn more than £30,000. I am able to look at purchasing ads based on user behaviour.

These new trends will push up the rates and allow Rupert Murdoch to get his money. However, MySpaces will never yield the utterly crazy margins that Google enjoys. People browsing blogs are not usually looking to buy things there and then, whereas Google does a pretty damn good job of funnelling potential buyers through to your site.

Mike Steinbaugh

I cancelled my account with MySpace yesterday. I think others are going to follow suit because Facebook now allows photo sharing. Their site is less corporate, more organized, and is rarely offline.

Gopi

I am no expert in branding type ads maybe news corp can extract top dollars for myspace ad inventory (especially if they bundle it with their TV ad inventory).

But i think the real monetization of that property is by exploiting the myspace brand offline, in this regard the myspace record label is a very good start.

Robert Young

Gopi, I agree with you that it would be virtually impossible for MySpace to attain the same ad rates as Google. But doing so actually wasn’t my point (and my apologizes if I miscommunicated).

My point is that there’s a *lot* of room to lessen the gap. In my experience, I believe MySpace should be able to decrease the difference to one order of magnitude. They should also do all they can to secure News Corp’s tremendous advertising expertise and resources towards attaining higher CPMs/CPCs/sponsorships. After all, one of the reasons why Google is able to generate the ad revenues they do is because they have hundreds of dedicated experts figuring out ways to extract micro-pennies from their ad engine.

Finally, it’s important to realize that even though MySpace is now a part of a huge conglomerate, it doesn’t mean they have a blank check without resource constraints. Murdoch is very penny-wise and budget-conscious… if he’s willing to bet his dollars, you better make damn sure you go with the initiatives that secure the high returns.

Gopi

>> Where is the data to support that MySpace gets more pageviews than Google?

I think the data is from comScore…Remember MySpace a very very sticky site (that too for the 16-25 demographic) and even if each of its 35 million or so users visit 10 pages a day its more than Google’s PageView’s

But remember most of that traffic is close to useless for lucurative contextual type ads. So they can never ever reach the CPM of google.

Jesse Kopelman

Where is the data to support that MySpace gets more pageviews than Google? That sounds on the order of saying that Vonage is doing more MOU than AT&T . . .

Gopi

Robert , i dont understand how you think MySpace can generate the same CPM as google… As you know not all online ad inventory are the same ,its a pyramid with search ads at the top, contextual ads on non-generic niche sites in the middle and banner ads on entertainment / teen/ community sites at the bottom.

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