MySpace in its own space

With the exception of Google, it's been a negative year for Internet stocks. Internet merger activity is quiet compared to last year, and there are few IPOs to get us excited. Vonage put a damper on any IPO enthusiasm. If MySpace were a standalone it would be a hot stock worth about $3 billion next year, based on revenue estimates of $528 million in '08, a 30% cash flow margin, and a multiple of 20 times. It's not a serious consideration at News Corp, but I'm sure the thought crossed their minds. After all, MySpace is adding 230,000 new members each day and has more than 90 million members. It's the fastest-growing property across the top Web brands, drawing 42 million unique visitors in May, up 329%, according to Nielsen//NetRatings. Monthly pageviews grew nearly 400% to 19.3 billion, second to Yahoo. But how will MySpace really make money?

Read my Net Sense column

Comments

[Matthew Cook]

I’m curious what experts say about the longevity of Myspace’s “hip” factor, i.e., how long with it stay on the radar of the core demographic “cool” list. Will it top out and become another “Friendster”. Will too many “common” people join making it not the place to be. Remember years ago there were about three or four major “do it yourself” personal web services similar to Myspace but without the “social links”. I can’t remember their names… Geocities, Tripod and I can’t think of the other one(s). I think Yahoo bought one of them and then it dropped off the radar and became last years “black”.

Matt

[Robert Jacobson, Ph.D. * Bluefire Consulting]

My experience on MySpace so far has been...ho-hum. It's basically a
copy of FriendFinder.com (owned by Various, Inc.) with links to music
and video sites. Customized pages are not just difficult to advertise on, they're virtually impossible to read -- and the
self-descriptions posted on profiles are ludicrous as a source of customer information. I've tried to be in correspondence with other users and found that the churn rate is enormous, probably close to 50% over three months -- plus, exchanges between 'users' generally consist of 50 words or fewer. "Of course, MySpace could lose 50% of its users and still be large, but so far, I've seen nothing that indicates any speciaal awareness of how to create a compelling experience, let alone keep users and slow the churn. And that music/entertainment boost? The A&R guys/girls I know think it's largely bands 'playing' MySpace like advertisers play
click-throughs. "I keep waiting for MySpace's secret sauce, Bambi, but it just isn't there. Advertisers are going to get hip as quickly as MySpace users do.
This is a white elephant reminiscent of the Dot-Com Boom."

Sorry, I don't see how the search-engine creators' expertise jives with community building. They come from two decidedly different worlds, engineers vs. communicators. The engineers are good at creating their own communities, but not creating them for others; that's been my experience.

Bob

[Michael W]

"With the exception of Google, it's been a negative year for Internet stocks."

Let's see...Goog opened the year on 1/3/06 at $422.52 and closed on the date of this post at $423.19...after a recent run-up.

I guess it isn't mathematically negative, but you would've made much more money buying into the S&P 500 back in January - which pretty much makes it a negative stock for the year. Funny how the Google Perception Machine works.

[BF]

To Mike W:
Maybe I was being too kind to Google. But, hey, it was the only Net stock that preserved your wealth if you bought a batch of Net stocks at the start of the year.

[Jeff McGuire]

How will social networks make money?
- A funny question considering the gazillion dollars of disposable income in the hands of the SpacePeople.
Lots of insecure young folk looking to establish/confirm their identities in traditional ways via modern connectivity - what they think, how they look, what they wear, what music and video moves them and what "community" accepts them. And in the end lots of individuality through mimicry. Same as it ever was.

Bambi,
Spent time last night with my daughter on MySpace looking up her soon-to-be college roommates. My younger daughter (middle school) has a space there as well.
I began to drift off.....
I imagined the site as a giant shopping mall full of kids like mine. And saw myself renting one of those little mall carts/kiosks where they offer all manner of trash and treasure to the random passers-by. Some buying, some pointing and laughing.
My cart was a place where the kids could stop, freely preview the latest fashions, even put themselves into the clothing and vote - Smash or Trash - and share that "buy it/deny it" with their clique. Clothing and accessory designers and manufacturers paid me for the social market research, buying links and word of mouth buzz my cart provided. and the kids had fun.

Jeff