TechCrunch’s scoop about MySpace’s new Facebookish “platform strategy” is generating buzz, but much of it is focused on the wrong news. The fact that MySpace is allowing third-party developers to insert applications on the social network isn’t groundbreaking: MySpace has always been crowded with third-party widgets, even before Facebook opened its APIs. If TechCrunch is right, MySpace will now formally open its own APIs (instead of just allowing widgets to be embedded in the site), but the real news here is the notion that MySpace will allow outsiders to sell their own ads and keep the revenue.
This would be a big strategy shift for News Corp. and MySpace. Whether the strategy will have any impact on the company’s fortunes and competitive position is another matter. UPDATE: It appears this is a moot topic, at least for the time being.
MySpace has had a back and forth with widget makers and other third party developers for a long time — at least since News Corp. purchased the network two years ago–but it had basically reached an uneasy truce: It would let developers embed apps on the site, but it wouldn’t let them sell ads, and it would limit the way the widgets linked off the site.
Why the restrictions? MySpace was concerned about creating another YouTube success story (the video-sharing site basically got its start as a MySpace app) without benefiting from it. And when another app–Photobucket–reached significant scale, MySpace responded by buying it. MySpace’s restrictive policies, however, drove many application developers to Facebook, where they have been allowed to make money. So giving developers the go-ahead to make money while sitting on MySpace real estate without paying rent would be a big strategy change for Peter Levinsohn and crew.
The change is obviously designed as a response to Facebook’s rocket growth and the success of its own platform strategy. But it’s a little late. Facebook’s real growth spike didn’t begin when the company announced its platform strategy; it started last fall, when the company opened up the site to all users. Entrepreneurs, investors, and developers are excited about Facebook’s open platform, but most Facebook users don’t know or care about it. The third-party apps do add value to the platform–thus helping to attract additional users–but most Facebook users are there because their friends are there.
MySpace’s own growth, meanwhile, has begun tailing off, which means it needs to make sure it hangs on to the users it has. A more open platform could help with this, but the company’s defensive strategy has already ceded a lot of ground to Facebook. Given the promises MySpace has made the Street, moreover, its most important priority is to figure out how to increase its ad revenues.