MySpace in critical condition?

Simon General, Social Media

Purchase of MySpace four years ago by Rupert Murdoch heralded a new dawn for social media and social networking. Suddenly these sites were big business. With a 330m price tag many scoffed, but critics were later silenced when a 670m advertising deal with Google for three years was agreed!

Soon however that deal will come to an end and with it more than half of MySpace’s entire revenue. But there are far more important concerns for MySpace and for British born Bebo. Bebo was purchased at a staggering 640m in March of last year by AOL. Those concerns are the decline of these once all dominant sites at the fickle hand of social media users.

The Losers
Surely such big sites can’t just head to obscurity and disappear? Don’t be so sure, British social networking site Friends Reunited enjoyed a 120m purchase from ITV four years ago and was recently valued at one sixth of the figure. The decision to swap from a paid model to a free one came way too late. Users have voted with their feet, the brand is damaged and they won’t be coming back.

Bebo’s traffic dropped 24% this year and now stands at 9 million. As original Beboers come of age they migrate to Facebook suggesting a digital coming of age, Bebo’s biggest problem is that new younger school kids aren’t replacing them below. By Hitwise’s estimates, Bebo’s unique users have fallen 18%, from 8.5 million in April 2008 to 7 million one year later, while Facebook has seen 63% growth to 23.5 million unique users.

Further problems are predicted for MySpace and Bebo, both sites are in comparison very expensive to run and a decline in traffic is hitting their cash flow hard. Add to this MySpace’s deal with Google which is about to end and Bebo’s financial backing in doubt following AOL’s disbanding from Time Warner.

The Winners
Facebook, Twitter and LinkedIn are enjoying massive increased popularity however. Twitter for example, has seen a 4,000% increase in new users since the start of this year to 2.5 million unique users a month. Add to these 3rd party apps which add another half of this traffic leading to an even greater impact! Facebook now control 45% of all social media activity on the internet World wide.

Most interestingly it is those social networking sites that have refused to sell to large greedy corporations that have ultimately succeed. Twitter more recently refused a huge deal with Google to advertise on the site.

And while large companies scratch their heads wondering what happened, it seems to me obvious that the reason for the decline is the worst marketing sin of all: assuming your audience are mindless fools, incapable of resisting advertising messages. MySpace is advert saturated, Bebo is advert saturated, and Friend Reunited charged you to watch their adverts. We are savvy, we don’t like adverts, and if the site is advert saturated we leave.

Even facebook fell into the trap, changing its simple and appealing interface for a multi-paged and advert heavy profile. An exodus I’m sure would have taken place had Facebook not been the best of a bad bunch. This could still see the end of Facebook in the next few years?

Ric McHale