Does Facebook's Overseas Growth Matter?

23 Comments

Earlier this month, I shared with you my post that called for a big wake-up call for Social Networking sector, thanks to the presence of too many me-too players at a time when recent traffic trends are showing signs of hitting a plateau. Hitwise recently reported that in the US, MySpace and Facebook ranked 1st and 2nd had 95% and 93% repeat visitors for the month.

The May 2008 traffic data from comScore furthers that argument. Another interesting finding of the May 2008 data – Facebook is doing much better than MySpace in the overseas markets.

Nevertheless, of late, I have stopped taking traffic on face value, and instead almost always juxtapose it to how much money you make off those page views. (Dave McClure recently chastised me for thinking too much in the short term.)

Matt Brezina, co-founder of Xobni earlier pointed out that Facebook will take in $265 million and MySpace will bring in $755 million in 2008. So unless the overseas (and overall page view) growth translate into real big dollars, our friends at Facebook (and MySpace) have problems. Experts believe that the answer is in better relevance in display advertising – still the dominant form of advertising on the social networks.

Facebook vs Others

The traffic trends have to be troubling for for geographic hits such as Orkut and Friendster. The overseas growth of Facebook also calls into question the veracity of the decision by AOL to pay $850 million for Bebo. Some data crunching by Andrew Chen (using the newly announced Google Trends) shows that Facebook is making big headway in markets such as UK, France, China, and India.  Orkut is very popular in India, while as the map shows Bebo is big in UK and other European countries.

I think it is these guys who need to worry the most with Facebook’s march & MySpace’s rear guard action. I suspect, if Facebook continues to grow, MySpace could opt for buying market share.

But if you take a larger view,  Chen’s conclusion, that “Social networks have weaker network effects than previously speculated,” is quite prescient. As someone once noted, social networks are like night clubs – there is always a cooler, hipper, funkier joint being planned by someone.

Over past few years, generally described as the golden years of social networking have led to the sector’s giants resting on their laurels. The fundamental nature (and utility) of social networks hasn’t really changed. The platform-ization of social networks has led to the rise of social apps that are best described as time wasters. You can be fascinated by vampire bites and what not but in the end, there is a finite amount of time you can waste.

In other words, Social Networks need to find new purposes for people to come back every day and be loyal. I had argued in my previous post that the world of social networks is going to be divided into two – the big players (MySpace, Facebook) and niche players (Dogster, Dopplr etc.)

In a recent chat, Ning CEO Gina Bianchini pointed out that they are adding 2000 new niche social networks every day and are now upto 315,000 networks. The niche is allowing the company to get even good non-optimized, straight-up average eCPMs from AdSense. She pointed out that they are about 3 to 4 times better than the average for general one-size-fits-all social networks. “This is because the social networks on Ning are organized around well-defined topics and interests – skiing, smart cars, diabetes, etc. As a result, contextual advertising works more effectively for Ning than it does for other general social networks,” she said.

Photo Courtesy of comScore via C/Net News.com’s The Social

23 Comments

David Mullings

Om is right that “Social Networks need to find new purposes for people to come back every day and be loyal”.

I only see immediate answers:

(1) Pay for loyalty – share ad revenue with me if I create content

or

(2) Focus on quality over quantity.

I check Facebook a few times per day because I run a group focused on young Jamaicans wanting to make a positive impact in that country. They discuss news, non-profits and solutions.

I also connect with other entrepreneurs and learn about upcoming events, ideas and case studies.

Content has always been king and the few “friends” I have creating quality content has kept me coming back to facebook and wanting to contribute quality content as well.

Social networks are merely tools – how you use them is what matters.

Hussein Fazal

I think the majority of people are short-sighted in terms of how significant facebook’s International growth really is. Yes, myspace still commands higher advertising revenues – this is obvious as they have a larger share of US consumers and this is where the mature Internet market and the advertising dollars really are.

However, it is becoming quite obvious that over the next few years, the economic power is gradually spreading from the US to other countries. Even from a strictly Internet Users perspective, China will be passing the US this year.

Anyhow, feel free to read more of my thoughts on this on my latest blog post at http://www.socialadblog.com.

chris

Myspace expects to make $755 million this year???

Exactly how much should the make before they’re considered successful?

Om Malik

@ Pavan K,

As to your specific question, I am trying to formulate an answer though it is a big foggy. The answer lies in the fact that we get our time wasters depending on our interest/age and environment. I think it is where the social networks need to find an answer.

Pavan K

Interesting. Particularly the night club effect, and time wasting with virtual vampire bites that do nothing to enhance your relationship with someone, nor lay the foundations for contextual/permission based advertising, or do they?

The current social networks are tied into their inertia of “social”, right? A Stanford Podcast with guys from FB, MySpace and Ning skims over this. Regardless, it seems people are happier to waste time throwing sheep. The Kissme application was one of the first to hit a million, was it not? These are surely amongst the reasons many stay, but then grow apart from their social networking service?

@ Blog Bloke – well said with regards to privacy, however, do the majority really listen? After all there are cameras everywhere now, and we remain aloof. So what actions should social networks take to raise the benchmark where privacy is concerned? It seems the foundations of FB would make it difficult for us to believe the hype whatever is done to persuade us otherwise? http://www.albumoftheday.com/facebook/

@ Om, would you mind expanding on your most pressing point: “Social Networks need to find new purposes for people to come back every day and be loyal.” What new ways to encourage interaction, engagement and loyalty do you foresee, other than just having a focus on niches?

Om Malik

@ Loic

Also the same graphic is doing the rounds elsewhere as well. It is on a whole slew of other blogs.

Om Malik

Loic

You are right – even though I gave Le Monde credit at the bottom of the page. I decided to take it off the story. Not worth the trouble.

bluepuma

Sorry, but the “adding 2000 new niche social networks every day” from Ning says just about nothing.

It means that 2000 people do the easy sign-up process at Ning to create a “social network”. I would estimate that about 80% leave right after that and never come back, maybe 15% invite a single friend and don’t re-appear after a week. The other 5% may be used continuously, perhaps with only a very small number of people. But still most are “abandoned” social networks – so who cares?

I do like the Ning idea, the conversion rates are of course made up, put please use some more substantial data. Let it be page views, unique visitors or revenue – or internal data like how many networks are really used continuously.

Loic

Hey Om, “infographie Le Monde” means this chart has been created by the daily newspaper Le Monde the best known in France and under full copyright. As you are not really a non profit blog I would definitely not use that kind of copyrighted illustrations without their approval or you will hear about them very soon… my two cents… Tim did exactly the same but at least he linked back to them.

grant

Google Trends has been around for at least a year, if not two or three… (Wikipedia says the data goes back to 2004 — I’m not sure it was public at that point.)

Blog Bloke

I’ve been saying for years now the so-called social networks are time wasters and misdirecting everyone away from developing their real blogs.

I compare the SN phenomena to bar-hopping. Today’s popular hangout will be yesterday’s flavour of the month.

Sooner or later the barflies are going to wake from their delerium and regret all those years wasted and realize their privacy has been raped and come back to haunt them.

Sad but true.

Om Malik

@ Ro,

I am yet to see your kind of time wasters monetizable. I actually think at least magazines/games/movies/ have some kind of revenue models worked out and have done so. On the widgets or so called facebook apps for instance, have huge “install” numbers but not enough dollars. What happens when the VC dollars run out. Anyway That is my opinion.

Glen Moriarty

I agree with your analysis and comparison to night clubs. Social networking sites definitely need to get creative and bring more value to their clients. I think you can make a strong argument that LinkedIn is doing this well. If sites do not bring value, then they risk what Mike Caufield called the “Dead Shark Problem.”

“A relationship, I think, is like a shark. You know? It has to constantly move forward or it dies. And I think what we got on our hands is a dead shark.”-Annie Hall, 1977

Users have to be intrinsically motivated to use the service. Something has to compel them to sign on, engage, interact etc. For more on intrinsic motivation and the dead shark problem, go here:

http://nixty.com/blog/2008/05/21/dead-shark-problem-when-communities-die/

Ro

Om-

Are you saying ‘time wasters’ like games, tv, magazines, chatting, watching sports etc aren’t monetizable? What matters is how many people are focused on any particular ‘time waster’ and how much time they’re individually putting into it. If you capture an audience, regardless of the content, there’s ALWAYS interest from advertisers. I’d also take a closer look at international monetization. There’s a lot more opportunity than most can imagine.

Ro

Markus Göbel's Tech News Comments

The latest post in the GigaOM group at Facebook says “Happy Holidays All From All Of Us – GigaOM” and dates back from Dezember 24. Although this group has 2189 members, you don’t seem to care too much.

That’s OK, they don’t care too much either. The comments section is full of shameless self advertising for other groups or websites, a. k. a. spam. At least the posted videos are only one month old. :)

I am OK with that. I check Facebook only once a week and don’t have the feeling to miss something. Do I?

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