MySpace Struggles in Monetization

Times may seem pretty tough for MySpace. Two rounds of layoffs. International offices closing. I’m guessing people are getting ready to count them out; another friend for Friendster on the social media scrap heap, clawing for relevance in a Facebook world.

Wrong. The recent rounds of layoffs and an effort to recreate the startup atmosphere they once helped to define demonstrate a renewed focus on channel innovation. MySpace may have faltered with its early monetization concepts (read: big obnoxious ads), but their audience is still too large and enthusiastic to give up. Hopefully MySpace will learn from the over-marketing and monetization employed since their purchase by News Corp.

MySpace stuck in the monetization phase

I can’t say that I blame MySpace for attempting to rely on ad revenue to drive their profits. When millions of eyeballs are on your site every day, and selling ad space is an historically proven revenue stream, why not? But the nearly $1 billion search deal with Google hasn’t exactly worked out, and Google looks to be renewing at a much more modest rate (modest by Google metrics). So it seems that at that point, MySpace stopped building a ground-breaking website and sold more and more ads … wherever they could fit them.

The Monetization phase is characterized by a leveling off in traffic. What it shouldn’t mean is a leveling off in innovation. MySpace’s mistake was in trying to make money off the users, monetizing user behaviors through targeted ads. This appears to have failed. Targeted ads don’t seem to be doing much for Facebook, either. What MySpace should have been looking to do was monetize their content and encourage high-quality production.

Finding hope in music

In looking at MySpace right now, I still see many eye-scorchingly painful user profiles, filled to the brim with apps, comments, and language that I don’t quite understand.

But something has emerged from this morass of flashy graphics. MySpace Music continues to thrive as a breeding ground for the next big thing on the music scene. From garage bands cutting their teeth on a 4-track, to the latest from Green Day, all musical genres are finding a democratic platform in MySpace Music.

MySpace should consolidate efforts around its best content: its thriving Music channel.

If MySpace hopes to progress in the Monetization Phase of its New Media Life Cycle, they will need to continue innovating the channel so users can continue adding value to their networks. And as stragglers and casual channel users disengage, those who are finding success will stand strong and engage more with similarly successful users. This results in high-quality, dedicated users. Anyone now marketing on the site (promoting a new band?) will be able to gain much more valuable insight from these quality users.

MySpace should look at startups like Bandize (currently in a private alpha) for inspiration when it comes to developing a robust music channel. Bandize’s focus on providing valuable tools for struggling musicians may seem basic, but it provides a very niche crowd with necessary functionalities for band “maintenance.”

So long as big names like Green Day exist side-by-side with unsigned acts still waiting for their big break, and so long as young people dream of being rock stars, MySpace will have an avid audience. They would do well to consolidate their channel innovations on Music. They should enable users to easily upload and share music, and they should promote their users’ very best content.

Further, emerging artists should use the Music channel to gain valuable feedback on new tracks and, of course, to spread the word. However, artists should be careful not to use MySpace simply as a promotional tool — instead, they need to actually engage with the motivated user base.

The takeaway

It is premature to suggest that MySpace is dying. While its days as the #1 destination of young people may never return, it can still prove to be an outstanding and valuable web channel. What this may entail, though, is a refocus of efforts away from the personal branding elements that they pioneered and on to the higher-quality content areas of their site. Investing heavily in their Music channel will ensure that MySpace remains a valuable and relevant web property.

My question to you

Quick: What’s the first thing you think of when you think of MySpace? What changes would you make to the site to enhance its relevance?

About the author

Andrew Davis -

In 2002, Andrew founded Tippingpoint Labs with journalist James Cosco. Since then, he's spent countless hours exploring the online universe and building a methodological approach to developing digital strategies that drive revenue or reduce costs.

Andrew's always asking big questions and analyzing data to understand markets, online forces and even business models. Andrew's research has resulted in the creation of innovative online metrics including Online Brand Value and Category Brand Value, eye-opening graphical representations of website evolution through the New Media Life Cycle and even using online data to predict offline revenue.

When he's not surfing the web, Andrew's traveling the globe speaking to a wide-variety of audiences about everything from social media to the future of print. Andrew is a frequent contributor to the Tippingpoint Labs website and has been creating valuable content since the early 1990s for The Jim Henson Company, CNN, The Today Show and MTV.

He's contributed to a book of short stories, called The Way Things Were and produced and co-wrote Roadside Ambition a documentary film about one small town with two huge balls.

"In a world where content is consumed as rapidly as it's created, companies need to develop a sound strategy to creating valuable online experiences that can, and should, be leveraged enterprise-wide. There is a content solution to every business challenge."