MySpace Losing Its Cool?

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Greg Sterling

05/21/06

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MySpace Losing Its Cool?

Last week at Yahoo! Analyst Day, the company touted its social search and social media strategies as giving it an edge over competitors Google and Microsoft. Yet here’s an article in which MySpace is favorably compared to Yahoo! as being far ahead of the Internet portal in developing and monetizing online community:

Yahoo was “overly defensive” [at Analyst Day] about the threat posed by MySpace according to JupiterResearch analyst David Card. He said the social networking site is “way ahead of Yahoo in creating a network of communities of teens and young adults, if not monetizing it.”

Yet MySpace faces dangers that Yahoo! does not in terms of it losing its “cool.” For example, here’s another piece (appearing on the same day) that says for some teens MySpace is no longer appealing now that it has become so big and more mainstream:

MySpace’s notoriety could be a turnoff for young people who are looking for an online community of their own, said Amanda Lenhart, a senior researcher for the Pew Internet and American Life Project. Lenhart has studied teens’ online behavior since the late 1990s. “Teens will go where their friends go,” she said. “They’re always looking for new places to gather. If those places become viewed as more regulated, they’ll move on.”

In fact, many in the media are fickle and always looking for the next thing or the contrarian angle. But there is a risk that if the intangible “buzz” goes away so will some of MySpace’s vaunted user base. But it’s also the case that MySpace is so dominant in its “social networking” market share that this threat, if it’s real, is certainly not imminent:

Source: Hitwise

As I’ve argued in the past, the challenge is preserving MySpace’s appeal to its target audiences, especially in view of increasing competition, appealing to advertisers and sustaining the appeal to both consituencies over time. MySpace is rapidly “institutionalizing” to do just that — building out features, brand extensions (e.g., IM, Video and Mobile) and monetization strategies. However, paradoxically, the more it “institutionalizes” to stablize and grow revenues (a market and News Corp. imperative) the more it might be vulnerable to “cooler” less established upstarts.

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Greg Sterling is the founding principal of Sterling Market Intelligence, a consulting and research firm focused on online consumer and advertiser behavior and the relationship between the Internet and traditional media, with an emphasis on the local marketplace.