Three years ago, social networking sites were largely the province of Internet geeks and diehard business networkers. Today, MySpace, the world’s largest networking site, has more than 102 million members, and is at the center of an entire ecosystem of startups and established firms serving up advertisements, content, and software that members can use to enhance their MySpace profiles or find friends more easily.
This “MySpace economy” parallels the mini-industries that have grown up around sites like Google, the focus of scores of “search-engine optimization” companies, and eBay, which encourages third-party software developers to build tools to make buying and selling on the auction site easier.
But as a platform for other businesses, MySpace may be far less stable than these other Web giants.
For one thing, its parent company, Fox Interactive, is not especially welcoming toward outside services that interact with, or depend on, MySpace’s servers. Last year, Fox banned users from adding videos from the leading video-sharing site, YouTube, to their MySpace profiles (the ban was revoked after users loudly protested), and threats of legal action from Fox Interactive have prompted the shutdown of several automated “MySpace mashup” sites that dip into MySpace profiles for information about, for example, a member’s dating status.
And while MySpace users represent a massive and still-growing marketplace – some 200,000 people joined the site on Tuesday, August 16, alone – actual traffic on the site has leveled off this summer, leading some commentators to speculate that the site’s popularity among young trendsetters has peaked. “The bloom may be falling from the MySpace rose,” writes Nicholas Carr, former executive editor of the Harvard Business Review and author of Does IT Matter?
To be sure, MySpace is one of the Web’s most remarkable success stories. Since its founding just three years ago, the site’s combination of simple tools for finding friends, customizing profiles, and sharing music and videos has helped it spread virally among teens and 20-somethings around the English-speaking world, leaving older networking sites such as Friendster far behind. “If you’re not on MySpace, you don’t exist,” as one high-schooler told Berkeley social networking researcher Danah Boyd. Indeed, MySpace is the sixth-most-trafficked website on the Internet, pulling in 15 to 20 million page views per day.
Ads on the site also account for 17 percent of all display advertising on the Internet, according to a July study by Nielsen/NetRatings. That makes MySpace irresistible to advertising companies such as Google, which recently promised $900 million to Fox Interactive Media over the next three years in exchange for the exclusive right to place keyword-based text ads on the site, as well as any display advertising not sold directly by Fox.
With Google and its peers wooing MySpace – the search company reportedly outbid both Yahoo and Microsoft’s MSN for the advertising contract – it’s no surprise that many smaller Web companies also sense profits in the making. One such firm is San Francisco-based Browster, creator of a free “browser-in-a-browser” program that allows Firefox or Internet Explorer users to quickly preview the sites listed on any given Web page, without the need to click through to those sites (see “Revamping the Web Browster”). The newest version of Browster’s tool, released on August 14, recognizes MySpace profiles (typically lists of friends) listed on a given member’s page and compresses them into highly simplified views that dispense with the distracting graphics and music found on many MySpace profiles. Browster has no direct financial relationship with MySpace; instead, it earns money by charging search engines and other companies for placement of their search boxes in the Browster window.
“MySpace is great for self-expression, but it’s painful for users who just want to move through lists of friends and people they might like to meet,” says Scott Milener, Browster’s CEO. “It gets very tedious, especially with these weird backgrounds and blue text and music playing. We give a clearer, simpler view that’s faster and that actually reduces the load on MySpace’s servers.”
Milener says going after MySpace users is “definitely a strategic move for the company.” Users of other data-heavy sites, such as eBay and CNN.com, might also appreciate Browster’s simplified views of the core content of each page, Milener says, but the company focused on MySpace first because viral marketing proceeds faster there. “No two users of CNN.com know each other or can talk to each other,” Milener says. “But MySpace has a built-in communication system, including instant messaging and e-mail and blogs. If one person likes Browster they are highly likely to tell 10 friends – or are at least highly enabled to tell 10 friends.”
Browster works for any website, not just MySpace. But a coterie of other sites exist solely to “feed the MySpace beast,” as Pete Cashmore puts it in his popular technology blog, Mashable.com. Most of them, such as PimpMySpace, MySpaceEditor, and MySpaceLayouts, offer graphics and design tools that help MySpace users build distinctive profiles. The sites typically don’t charge for their services, subsisting instead on advertising. Another class of sites – media-sharing networks such as YouTube and Odeo – help users place video links or podcasts onto their MySpace profile pages; viewers or listeners are often directed back to the site hosting the content, which then earns advertising dollars.
But how long can MySpace sustain these peripheral businesses? Despite its growing user base, actual traffic at MySpace plateaued about four months ago. In October 2005, MySpace accounted for about 8 out of every 1,000 daily page views on the Web, according to the Web traffic-monitoring company Alexa; by April 2006, that figure had grown to 20 per 1,000. But since then, MySpace page views as a percentage of overall Internet traffic have been static or declining.
The leveling-off of traffic to the site could merely be a sign that MySpace’s main users – 16-to-24-year-olds – are on summer vacation. Or it could mean that MySpace has become so well known that it’s no longer the coolest hangout for teen trendsetters. Indeed, in the midst of MySpace’s plateau, the new social-networking site Bebo, which is aimed specifically at high-school and college students, has seen a doubling in traffic (to about 4 per 1,000 page views).
There’s one more reason MySpace may be a hazardous site to build a business: It can be an inhospitable place for outsiders offering services that draw directly from the MySpace database, for example, by mining profiles automatically. Consider the case of DatingAnyone.com, a site that notified MySpace members whenever a friend’s relationship status changed from “taken” to “single” or “dating.” The service won praise among technology bloggers as a clever and useful addition to MySpace. But in June, site-owner Jared Chandler received a letter from MySpace lawyers saying that the site violated MySpace’s terms of service by placing “an undue burden on the MySpace servers” and demanding that it be shut down; Chandler complied. A similar site, SingleStat.us, suffered a same fate in the same month.
In the end, developers and entrepreneurs who want to offer services to users of large sites may be better off working with companies such as eBay, which explicitly encourages third-party developers to build applications that interface with its inventory database (see “EBay: The OS for E-Commerce?”). “We want to build a platform for innovation,” says Eric Billingsley, senior director at eBay Research Labs. “We want third-party developers to develop [new applications] for us, and we allow them to profit from it.”
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