How Myspace LOST 115 million users
Sacrificing experience for ads
Myspace achieved 1,000,000 users in one month, while Facebook took a year to get there.
At one point, the traffic on Myspace was higher than Google.
But at $800M in revenue, and a $12B valuation, Myspace still failed.
Escape competition in just 5 minutes. Because business school doesn’t teach you how the 1% manipulate the market
Myspace was founded in 2003 by Tom and Chris. They were working at eUniverse, an internet marketing company.
They created the first version in only 10 days.
To get their first users, Tom and Chris used eUniverse's 20 million email subscribers to spread the word about their new website.
And within a month, Myspace had 1M subscribers. In 9 months, 5M subscribers!
A reminder to any new startup looking to growth hack to use other people’s network to build your own.
So, what went wrong?
Tom becoming everyone’s friend
At the same time, Myspace seemed to have the perfect business model:
1) ZERO content generation cost - Myspace users themselves created content on the platform for free
2) ZERO user acquisition cost - The word about the platform spread organically
3) Sky-high revenues through advertising
Myspace's ecosystem was thriving.
Advertisers could simply display ads on the platform, generating mind-blowing revenue for Myspace.
The FOX acquisition
In July 2005, News Corporation (Fox) bought Myspace for $580M beating out a huge competitor, Viacom, for the deal.
Very soon, Myspace was making $30M per month.
At its peak in 2007, Myspace reached $800M in revenue and 22M users with a $12B valuation.
These are crazy numbers.
But, things were going to change in dramatic fashion.
The CEO of NewsCorp, Rupert Murdoch was exceedingly confident about the business model of Myspace.
So confident, that he made a bold claim that Myspace would make $1 billion in revenue in 2008.
But in 2008, Myspace user numbers started to decline.
Everything, everywhere, all at once
Myspace was going wide instead of deep.
They were trying to be an everything-in-one platform with music, blogging, video, sports, and jobs, on top of being “a place for friends.”
There was also way too many ads.
Making the platform look cluttered, noisy, and made the load times way too slow.
It’s understandable that’s their revenue model, but it shouldn’t greatly affect the online experience of users trying to enjoy it.
And if that wasn’t enough to drive users away, they neglected mobile experiences at a time when the iPhone released.
Myspace’s design was so desktop dependent.
While Facebook understood the importance of it and the amount of people using social on mobile, Myspace’s new old-aged owners didn’t put any thought on it.
Maybe because the ad banners wouldn’t be big enough? 🤷🏻♂️
By 2008, Facebook and Myspace were both at 115M unique visitors.
The same year, Facebook surpassed Myspace in unique visitors by succeeding where Myspace was floundering.
Even with all the odds against Facebook.
Myspace had music, videos, local partnerships, mobile integration, millions of bands, four times as many users, the marketing sway of the FOX media empire, 22 international offices and $900 million in cash from Google.
And Facebook still took over social.
Because they focused more on product for its core use, instead of trying to do everything in one platform. With the main differentiation being the timeline. Updated every minute with all your friends activity in one continuous stream.
Which lead to people switching platforms and Myspace losing 40M unique visitors per month.
They couldn't dig themselves out of some big holes.
And in the end, innovation and product experience won.
Escape competition in just 5 minutes. Because business school doesn’t teach you how the 1% manipulate the market.