MySpace's Fall from Favor Threatens Deal with Google

In 2006, which is ancient history in the online social network world, Wharton marketing professor David Bell told Knowledge at Wharton that "there is a fad or a fashion component to all these networks. Some will come and go." At the time, MySpace had risen to the dominant position in what was then a new sector, luring users from early-riser Friendster by offering a better array of tools for sharing photos and music.

Now MySpace is the network that's losing traffic, and that threatens to diminish the value of a $900 million search agreement it has with Google by about $100 million, according to an article in the Financial Times. Knowledge at Wharton also noted MySpace's loss of traffic in a recent article, "Early Tremors: Is It Time for Another Social Network Shakeout?"

“On many dimensions — building traffic, brand-building, etc. — MySpace has been an unmitigated success," says Wharton marketing professor Eric Bradlow, who co-directs the Wharton Interactive Media Initiative. "However, the question remains: What is the viable business model for a social networking web site? [MySpace] started with … advertising [charging fees based on the number of times the ads were viewed], has been moving towards widgets, and may move towards targeted ads based on the network data.  However, as with any start-up, what business you end up in is not always the business you start in.  I think the same will be true for My Space.” Widgets are tools that attract MySpace visitors to third-party services, generating revenue for MySpace.

Others have noted the differences in social media environments as a factor driving people to or from any particular site. A recent CNN report noted a study by market research firm Nielsen Claritas which found that people in more affluent demographics are 25% more likely to use Facebook, while the less affluent are 37% more likely to be on MySpace.