MySpace crowded out

It seems the world is queuing up to bash Rupert Murdoch and News Corp over today’s disastrous sale of MySpace, and with good reason. It’s not often you get to watch one of the world’s most astute media moguls burn $500 million on a social network that is a shadow of its former self.

The chief criticism of Murdoch and News Corp is that they failed to innovate to prevent the mass leakage of users to the now undisputed king of the social network world, Facebook.

Sean Parker, a former Facebook executive and shareholder, summed it up best in a recent interview the NExTWORK Conference in New York (reported on Tech Crunch earlier this week). When asked where MySpace went wrong, Parker let fly.

“The failure to execute product development,” Parker said.

“They weren’t successful in treating and evolving the product enough, it was basically this junk heap of bad design that persisted for many, many years. There was a period of time where if they had just copied Facebook rapidly, they would have been Facebook. They were giant, the network effects, the scale effects were enormous.”

Amazingly, it is only two years ago – back in May 2009 – when the monthly unique users of Facebook and MySpace in the US were even at about 70 million.

Since then, Facebook’s monthly unique have climbed to 157 million, while MySpace’s fell to 34.9 million.

While it does appear that News Corp forgot that golden rule of business – innovate or die – I do wonder if MySpace could have really been saved by the innovation Parker suggests (actually, he’s arguing for straight out copying).

For me, social networks are very different types of “businesses” that we are still struggling to understand.

I see them as being built on crowds rather than products.  No matter how good the platform and features of a social network are, without a crowd to communicate with, a network cannot succeed.

But crowds don’t necessarily follow normal business rules.

Social networks are not like a widget company that finds itself besieged by a new firm with a better cheaper product. The widget company can stop customers leaving by matching its competitor’s product.

But in the social media business, when the crowd moves to the next big thing, is matching your rival’s product enough?

Was the fall in MySpace’s traffic over the past two years due to users deciding Facebook had innovated better and now had a better product?

Possibly, but surely the dramatic swing also has something to do with friends following their friends to Facebook, with parents and grandparents following their sons and daughters.

A lack of innovation may have sowed the seeds for MySpace’s downfall, but Facebook’s momentum – built arguably more on the movement of the crowd than any innovative thing Facebook or MySpace did or didn’t do – is what has crushed Rupert’s investment.

Am I right or wrong? We’ll probably have to wait to see how and if Facebook’s position is challenged in the coming years to see how well it can arrest a slide in user numbers and prevent it gathering momentum.

We might not have to wait that long. While Facebook’s position looks impregnable, there have been some stories about user numbers falling in Britain and the US ever so slightly in recent months, although Facebook has responded to this by saying growth is strong.

But as the MySpace example shows – and this is supported by other failed social networks such as Bebo, Friends Reunited and Friendster – the cycle of these businesses is very short. After all, it is only four year since Tech Crunch was suggesting MySpace could be worth $US12 billion.

That could suggest internet businesses experience shorter lives than other companies, but that’s a debate for another day.