Social Networks: Monetization Even in Death.

The explosion in social networking sites and technologies over the past few years has been nothing short of staggering. When I first joined Facebook sometime back in 2007 I only did so because of the social pressure to do so, not because I had any interest in the technology itself. Fast forward a year or two and you would be hard pressed to find anyone of my generation who isn’t on at least one social networking site with many of them on several. Today social networking and media are the biggest draw cards of the Internet with them only being surpassed by the long time giants like Google and Yahoo.

As with the dot com crash before it the kind of sensationalism that surrounds the social Internet has led to a veritable army of competing services all looking for a slice of the extremely profitable pie. For the most part they all have their niche, such as Tumblr and DeviantArt, and a dedicated following that will ensure that they’re around for a long time. Other sites are popular due to a critical mass of users within a region, such as Friendster and hi5. Any social networking site that doesn’t fit into these two categories generally comes and goes without too much fanfare leaving their creditors in the lurch and a set of users looking for another service. Due to the fact that social networking is still a new phenomenon we have yet to see a giant fall, but that doesn’t mean some aren’t about to.

Take MySpace for instance. Ever since it was dethroned as the number 1 social networking site by Facebook it’s been on a long downward path to becoming irrelevant. The past year have seen it drop from its lofty heights of the top 10 most visited sites on the net to its current position of 16. Whilst I doubt that it will fade from existence completely, thanks mostly to the niche it cornered with band/music sites, you can bet that this drop in traffic is hurting their bottom line.  Still the current owner, media giant Rupert Murdoch, has no plans to sell off his interest in the flailing site so that begs the question: what’s he got up his sleeve?

About 6 months ago I was having a healthy debate with some of my friends about the life and death of social networking sites. A few held the belief that these sites were going to be very short lived and we’d soon see them fall off the face of the earth. I didn’t share their view but became interested in what would happen as a social networking site started to circle the bowl. In the end I came to the conclusion that when advertising revenue began to wane they’d turn to the thing that once made them great: their users. So whilst you might not have the eyes to attract the advertisers you once did you do have a giant database on millions upon millions of people, with all sorts of delicious data mineable data held within. I made the point that upon the company realising the site was going down they’d start selling off data whilst it was still relevant in a desperate hope to keep themselves afloat.

You can then imagine what I thought when I saw this little tidbit of news:

MySpace has taken a bold step and allowed a large quantity of bulk user data to be put up for sale on startup data marketplace InfoChimps. Data offered includes user playlists, mood updates, mobile updates, photos, vents, reviews, blog posts, names and zipcodes. Friend lists are not included. Remember, Facebook and Twitter may be the name of the game these days in tech circles, but MySpace still sees 1 billion user status updates posted every month. Those updates will now be available for bulk analysis.

This user data is intended for crunching by everyone from academic researchers to music industry information scientists. Will people buy the data and make interesting use of it? Will MySpace users be ok with that? Is this something Facebook and Twitter ought to do? The MySpace announcement raises a number of interesting questions.

The 22 sets of data being made available are cheap. Prices range from $10 for raw dumps from the MySpace API to $300 for everything broken out by latitude and longitude. Subsequently derived data sets can be put on sale by InfoChimps users as well, with a revenue split.

It’s always nice when you make predictions that are eventually vindicated 🙂

Save for the companies that will build their revenue streams off doing exactly this your traditional free, ad supported social networking site will one day turn around and start selling your data when times get tough. To be honest I’m surprised that they didn’t do it sooner as in June last year they slashed their workforce by about 30%, another sign of their imminent downfall. So whilst this maneuver won’t draw anymore users to MySpace it will probably keep them afloat for a little longer, maybe in the hopes of revitalizing or re-branding it.

Does this mean that other sites will quickly follow suit? Unlikely, whilst its tempting to start peddling out your data to anyone who wants it you open yourself up to a whole lot of issues with privacy that might not be immediately apparent. Whilst I appreciate that most users will probably be unaware of MySpace doing this if, for example, Facebook did this you can guarantee that there would be a noticeable backlash amongst the more privacy savvy crowd. It probably wouldn’t hurt them in the long run, but it really wouldn’t do them any favours as well.

MySpace is well on its way to be the first casualty of the social web and its demise will provide interesting insight into how these giant social sites unravel as they venture downwards. It will still be a long time before we can stick a fork in MySpace but the slow downward trend it is facing will show us what to look for in the other Internet giants should they begin to falter.

3 Comments

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  1. This certainly doesn’t surprise me, but I think that you’re omitting many of the other actions that MySpace is taking in an effort to stop their users jumping ship, such as driving the creation of new interactive content via the promotion of new APIs for game developers, Unity3D support for 3D gaming, etc (though this is also an obvious effort to attract some of the ludicrous wealth acquisition in the social games industry). They’re seeking to do for online games what they did for music a few years ago – become a hub for users to find and share new games.

    I think it went into red alert last month when the CEO resigned and selling user data is the company doing what it can to prop up it’s profits while it’s diversifying its offerings from Facebook (the current MySpace is functionally similar to Facebook).
    I’m not sure if the promotion of content

  2. Hrm, looks like my comment didn’t finish properly.

    I think that I meant to say was that I’m not sure if the promotion of content will stop the exodus of MySpace users, but if it does you can be sure that other social networks will follow suit.

  3. It will be interesting to see how they go in trying to reinvent themselves but I doubt it will be enough to save them. I can see them carving out a very good niche for themselves but it will take nothing short of a miracle to bring them back to the position that they once have.

    That doesn’t stop them from being profitable though.

    It’s definitely a sign that they need to drum up some cash in order to fuel their plans for ramping MySpace up in different ways but the graphs don’t lie, they’re still on a downward trend. There are slight surges here and there but until that graph levels out they’re bleeding users and pageviews like crazy, and with that their revenue.

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