MySpace
From Invertopedia, the encyclopedia of how things fail
MySpace was the social network that briefly became the most visited single website in the United States[7]. News Corp bought it in 2005 for $580 million[3], and in 2011 sold it to the ad network Specific Media for about $35 million, mostly in stock[1][5]. In between, a $900 million Google search deal tied to traffic targets pushed MySpace to double the ads on its pages[4][2], and its US audience fell by more than half as users moved to Facebook[2][8][1].
Contents
The bet
Rupert Murdoch said the site would drive traffic to News Corp's Fox TV sites, at a time when advertising money was moving online[3]. The plan was to turn a huge free audience into ad revenue: the Google deal guaranteed Fox Interactive at least $900 million over three years as long as MySpace met traffic and other commitments[4].
MySpace would build everything itself. Instead of opening a platform to outside developers, it shipped instant messaging, classifieds, a video player, a music player, karaoke and more on its own[2].
What happened
| Aug 2003 | Chris DeWolfe and Tom Anderson launch MySpace while working at the internet marketing firm eUniverse.[2] |
|---|---|
| Summer 2005 | News Corp buys Intermix Media, owner of MySpace, for $580 million. MySpace is the fifth most-viewed domain in the US.[3][2] |
| Jul 2006 | MySpace passes Yahoo Mail to become the most visited single site in the US, with 4.46 percent of all US visits in one week.[7] |
| Aug 7, 2006 | Google agrees to pay at least $900 million over three years to be MySpace's search and ad provider, if traffic targets are met.[4] |
| Dec 2008 | Peak: 75.9 million US monthly unique visitors, according to comScore.[2] |
| May 2009 | Facebook passes MySpace in US visitors for the first time, 70.28 million to 70.24 million. A year earlier MySpace had led 73.7 million to 36 million.[8] |
| Jan 2011 | MySpace lays off 500 people, 47 percent of its staff.[6] |
| Feb 2011 | News Corp starts looking for a buyer at an asking price of $100 million.[2] |
| Jun 29, 2011 | News Corp sells MySpace to Specific Media for about $35 million, mostly in stock, and keeps a stake of less than 5 percent. About half of the 500 remaining workers are to be laid off.[1][5] |
| Mar 2019 | It emerges that MySpace, blaming a faulty server migration, has lost everything uploaded before 2016, including more than 50 million songs from 14 million artists.[9] |
The kill shot
MySpace sold its pages to hit revenue targets while Facebook kept its pages clean. The ads made the site slow and ugly, and users had somewhere better to go.
Co-founder Chris DeWolfe told Bloomberg Businessweek: "When we did the Google deal, we basically doubled the ads on our site."[2] Unlike venture-backed rivals, MySpace had to hit quarterly revenue targets, and its former head of marketing said there were changes "we knew would be more efficient for the user that we didn't act on immediately because it would reduce page views."[2]
The product suffered too. New features were often buggy and made the site slow and hard to navigate, and the site was built on ColdFusion for speed to market[2]. AP reported that heavy banner ads slowed page loads while Facebook added a news feed and opened up to outside apps; one analyst called apps "the breaking point"[1].
Red flags ignored
- Revenue tied to traffic. The Google deal paid only if MySpace hit escalating traffic numbers, so every page view became a target.[4][2]
- Twice the ads. Ads doubled after the Google deal, including gross-out ads MySpace asked the sales team to stop selling.[2]
- Build everything in-house. MySpace shipped a dizzying number of features, many of them shallow, while Facebook let outside developers build on its platform.[2]
- No habit of testing. Former staff said there was little culture of testing, measuring and iterating, so new products were often buggy.[2]
The cost
News Corp paid $580 million in 2005[3] and sold for about $35 million in 2011, well below the $100 million it had been asking[1][5]. It lost about $1.4 billion over the 11 quarters before the sale in the division that held MySpace[1].
MySpace's ad revenue fell from $470 million in 2009 to a projected $184 million in 2011, according to eMarketer[2]. Its US audience dropped from 75.9 million monthly visitors at the peak to 34.8 million by May 2011[2].
The inversion
Don't trade the experience your users came for to hit this quarter's ad number. If a deal pays you for page views, ask what it will make you do to the page.
What survived
The brand. Specific Media bought it with Justin Timberlake taking an ownership stake and planned to use it for social advertising[6]. The music archive did not survive: by 2019 the company had acknowledged that content uploaded before 2016 was gone, and it blamed a faulty server migration[9].
References
- ^ “News Corp sells MySpace for $35M, mostly in stock”. AP via Phys.org, June 29, 2011. The founders and 2003 launch, the sale to Specific Media for about $35 million mostly in stock, the under-5 percent stake, the planned layoffs, the $1.4 billion segment loss, banner ads slowing pages and Facebook's news feed and apps.
- ^ “The Rise and Inglorious Fall of Myspace”. Bloomberg Businessweek (Felix Gillette), June 22, 2011, archived copy. The August 2003 launch at eUniverse, the 2005 Intermix purchase, the December 2008 peak and May 2011 audience, ad revenue figures, the $100 million asking price, the Google traffic conditions, DeWolfe's "doubled the ads" quote, revenue pressure, in-house features, bugs and ColdFusion.
- ^ “News Corp in $580m internet buy”. BBC News, July 19, 2005. News Corp buys Intermix, owner of MySpace, for $580 million; fifth most-viewed US domain; Murdoch's plan to drive traffic to Fox sites.
- ^ “Google pledges $900 million for MySpace honors”. CNET (Stefanie Olsen), August 7, 2006. The Google deal: minimum payments of $900 million over three years if Fox meets traffic and other commitments.
- ^ “News Corp. Takes Huge Loss, Selling Myspace For $35 Million”. NPR (Eyder Peralta) via WYSO, June 29, 2011. The $35 million sale in stock and cash, below the $100 million asking price; Facebook overtaking MySpace.
- ^ “News Corp. sells Myspace to Specific Media”. CNNMoney (Laurie Segall), June 29, 2011, archived copy. The January 2011 layoff of 500 staff (47 percent), Justin Timberlake's ownership stake, and Specific Media's advertising plans.
- ^ “MySpace grabs top spot among U.S. sites”. Reuters via CNET, July 11, 2006. MySpace passes Yahoo Mail as the top single US site, 4.46 percent of visits (Hitwise).
- ^ “More Americans Go To Facebook Than MySpace”. PCMag, June 16, 2009. Facebook passes MySpace in US unique visitors in May 2009 (comScore), and the May 2008 comparison.
- ^ “Myspace loses all content uploaded before 2016”. The Guardian (Alex Hern), March 18, 2019. The faulty server migration and the loss of more than 50 million songs from 14 million artists.