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@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@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.