At Web 2.0, MySpace CEO Owen Van Natta discussed a new content-centric strategy.
Now that the company has lost the war for social-networking dominance to Facebook, it makes sense to try to find a new business. But MySpace’s new idea sounds weak.
- MySpace is conceding the battle for social network dominance to Facebook, which will continue to take most of the ad dollars from this attractive, growing space.
- MySpace is entering a highly competitive market for normal brand advertising, and it is likely underestimating how competitive this will prove to be.
Bottom line: MySpace is in a very difficult position. Facebook has won the social network war, and MySpace’s new strategy is to go head-to-head with massive, seasoned Internet companies that have many competitive advantages. The odds that MySpace will turn itself around seem low. Henry Blodget recently argued that it is basically worthless.
Here are two quotes from Van Natta’s interview:
“We think we’re different from Facebook because you don’t have to have a real connection to use it. Maybe you use it to discover music. Music tastes get influenced by your friends. Also movies. These are touchstones in relationships. You shouldn’t have to know them in the socialisation of content.”
This is important. Facebook has grown into a major direct-communication tool between people with real connections, whereas MySpace is re-positioning itself as a platform for content with communication among its members a secondary concern. The implications are:
- Facebook will be able to continue to develop and search for “killer-app” ad products that incorporate ultra-targeting and viral elements driven by direct communication among its members (which communicate way more than MySpace’s) while MySpace will sell branded ads around its audience size and demographics.
The opportunity to develop killer-app products like Facebook’s self-serve display ads or engagement ads is likely far greater than growth in branding dollars. Automation, viral possibilities (a user responds to an engagement ad and the sponsor’s logo becomes that user;s page wallpaper), and search-like ROI characteristics have much more potential for scale, especially with Facebook’s growth in both audience and engagement. But MySpace has conceded this growing opportunity to Facebook.
And another: “We’ve always been good at monetizing our business. This is integrated marketing that no one else on the web does.”
Actually, MySpace has not been good at monetizing its site. Google sends the company about $300 million per year as part of a search ad deal, which is estimated to be over 30% of MySpace’s revenue.
More importantly, there is a lot of competition for the kind of “integrated marketing” campaigns MySpace will be selling when it transforms its social network into more of an entertainment content hub with an associated member base. Now MySpace will be going head-to-head with some massive, well-funded, mature Internet companies in the battle for online branding dollars.
- Yahoo has been selling premium integrated packages for years and yesterday announced a branded content partnership with agency Group M, indicating it intends to be ahead of the curve when it comes to premium online ad packages.
- Microsoft has the ability to sell premium ad packages across TV (Xbox), Online (MSN), and Mobile, which MySpace will have a tough time competing against.
- Microsoft and Google use data from search and user usage in order to enhance the value of its ad packages.
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