From Business Week
Copyright Business Week
Generation MySpace is getting fed up
By Spencer E. Ante and Catherine Holahan for Business Week
Published 7 February 2008
Check out Spencer's blog at Creative Capital
If you want to socialize with Chris Heritage, you won't find him on Facebook. The 27-year-old Port St. Lucie (Fla.) business analyst joined the social network last year after his buddies bugged him to get an account. But he soon became fed up with the avalanche of ads, especially those detailing what his friends were buying, and he quit the site in November. Now, Heritage expresses himself through a blog, happy to pay $6 a month to publish on a promo-free Web site. "It's worth it to not have to look at the ads," he says.
Uh-oh. Social networking was supposed to be the Next Big Thing on the Internet. MySpace, Facebook, and other sites have been attracting millions of new users, building sprawling sites that companies are banking on to trigger an online advertising boom. Trouble is, the boom isn't booming anymore. Like Heritage, many people are spending less time on social networking sites or signing off altogether.
he MySpace generation may be getting annoyed with ads and a bit bored with profile pages. The average amount of time each user spends on social networking sites has fallen by 14% over the last four months, according to market researcher ComScore. MySpace, the largest social network, has slipped from a peak of 72 million users in October to 68.9 million in December, ComScore says. The total number of people on such sites is still increasing at an 11.5% rate, but that's down sharply from past growth rates. "What you have with social networks is the most overhyped scenario in online advertising," says Tim Vanderhook, CEO of Specific Media, which places ads for customers on a variety of Web sites.
Advertising on social networking sites is growing fast. Last year global ad spending on these sites shot up 155%, to $1.2 billion, says researcher eMarketer. This year, eMarketer expects it to jump 75%, to $2.1 billion. During its Nov. 4 earnings call, News Corp. (NWS) gave an upbeat forecast for Fox Interactive Media, which includes MySpace.
But the forecasts for torrid growth may prove unrealistic. Besides the slowing user growth and declining time spent on these sites, users appear to be growing less responsive to ads, according to several advertisers and online placement firms. If advertisers can't figure out how to reverse these trends, social networking could end up as a niche market in the online ad world, smashing hopes and valuations across Silicon Valley.
The current strength in advertising on social networks may be exaggerated by guaranteed ad deals and hopeful experimentation. Google (GOOG) and Microsoft (MSFT), in hot competition with each other, promised a number of sites a minimum amount of advertising revenue in exchange for the exclusive right to place ads on those sites.
But the early results from those deals are mixed. On Jan. 31, Google said it didn't generate as much revenue from social networking ads as expected. Google, which has a $900 million guaranteed deal with MySpace for placing ads alongside search results, says existing ad approaches aren't working well on social networks so far. "I don't think we have the killer, best way to advertise and monetize social networks yet," said Google co-founder Sergey Brin.
When News Corp. reported its earnings, it said revenues for Fox Interactive Media surged 87%, to $233 million. But $62 million of that came from Google's guaranteed deal with MySpace. It's unclear whether Google, which ad experts believe is losing money on the deal, will sign similar agreements in the future.
Another big slug of ad revenue is coming from companies experimenting with social networks because they are such a popular new medium. But for some, the results have not been encouraging. Many of the people who hang out on MySpace, Facebook, and other sites pay little to no attention to the ads because they're more interested in kibitzing with their friends.
Social networks have some of the lowest response rates on the Web, advertisers and ad placement firms say. Marketers say as few as 4 in 10,000 people who see their ads on social networking sites click on them, compared with 20 in 10,000 across the Web. Mark Seremet, president of video game publisher Green Screen, stopped advertising on MySpace last spring because of a 13-in-10,000 response rate. "It's really hard to make money on that anemic click-through rate," says Seremet.
MySpace and Facebook recognize the issue but say increased targeting and other innovations will spur users to pay more attention. Last fall, both rolled out programs allowing marketers to pitch products to people in hundreds of categories of interest, such as fashion and sports. News Corp. President Peter Chernin said on Feb. 4 that response rates on MySpace improved as much as 300%. Owen Van Natta, chief operating officer at Facebook, says there will be more experimentation in the future. "There's so much innovation that needs to happen," he says.
But there's a catch-22: More aggressive ad programs can lead to more frustrated users. Ryan Lake, 34, just left MySpace because of the ads. "There are so many, and they are getting more and more obtrusive," he says.
Facebook, the second-largest social networking site, which continues to grow rapidly, introduced an ad program in November, called Beacon, that alerted users to the purchases of friends in hopes of spurring sales. More than 75,000 Facebook members signed an online petition against the effort. Carol Kruse, Coca-Cola's (KO) vice-president for global interactive marketing, says that while she thinks social networks present a big opportunity, Coke is avoiding Beacon for now.
MySpace has had complaints, too. Nina Pagani, a 20-year-old New York student, grew furious last year when MySpace began automatically posting on users' home pages notifications of friends' favorite products. "Your personal MySpace page became an advertisement," she says. Pagani, a five-year MySpace member, deleted her account in December. "It caused too much drama in my life," she says.
Interesting article from Seth Godin on the pricing of digital movie rentals...
The movie studios are starting to get excited about renting movies digitally (via Apple and others). The pricing seems to be modeled on Blockbuster (+). Figure $3 a rental, another buck or so for HD. That seems 'fair', because it's in the same range as we're used to.
Blockbuster buys DVDs for $15 or $20 (probably a lot less in volume, but I have no clue what the real number is). The studios have to pay for duplication and warehousing and marketing and they take a risk with every pressing that they'll have to shred the leftovers.
Blockbuster then rents them out 30 or 40 or more times each, meaning each rental costs Blockbuster fifty cents. Not to mention rent, surly clerks, cost of capital, advertising, etc. Or, in the case of Netflix, stamps.
In the case of online rentals, all of these intermediate costs immediately disappear. Gone.
So, why try to mimic the current model when it comes to pricing if the costs are mostly gone?
The same thing goes for online music and for PDF versions of books. Kevin Kelly figured this out with his book on films. He makes $1.50 a copy regardless of whether you buy the beautiful color edition or the cheapest edition he sells. Why should he care which version you choose?
The current phone novel craze in Japan is even more evidence for why this makes sense. 2,000,000 people download the phone novel you wrote (it costs you nothing) and then, when it becomes a hit, you make millions on the sales of the paper book and the movie...
No, I don't think Free is always the answer, but I do think the studios are about to make a mistake of RIAA proportions. I'd charge fifty cents for an online rental. It would immediately hammer the rental stores (which is fine with Hollywood) and DVD replicators (also fine with Hollywood) but would instantly teach people a new habit. Then, once the new habit is set and you've earned permission, sure, charge more for new movies and for blockbusters. 300 million movie theatres, all selling tickets every single night--you don't need to charge $10 a seat when you have access to everyone.
It's important to charge something, because the act of paying fundamentally changes the dynamics of the relationship. The question is this: at the start, is your goal to maximize profit or to build a platform that scales? The fact is that the market is too small right now for the price to matter. What matters is whether you can build an audience that is in the habit of paying you, an audience that wants to hear from you, an audience that you can build a business on.
At fifty cents a rental, all desire for piracy goes out the window, replaced by convenience, ease of use and a clear conscience. More important, entire new services show up, habits are built and the studios end up with a direct relationship with consumers who want to hear from them. If they don't get greedy at the start.
Social network theorists Duncan J. Watts of Columbia University and Peter Sheridan Dodds have tested The Tipping Point's theory that trends or epidemics are driven by few influential people who convince others of their opinions.
Their findings are perhaps not revolutionary, but they do shed light on the role of the influenced rather than the influencers.
Excerpt from the article on Science News Online:
More important than the influencers, the researchers found, were the influenced. Once an idea spread to a critical mass of easily influenced individuals, it took hold and continued to spread to other easily influenced individuals. In some networks, it was far easier to get an idea established this way than in others. The entire structure of the network mattered, not just the few influential people.
Dodds compares the spread of ideas to the spread of a forest fire. When a fire turns into a conflagration, no one says that it was because the spark that began it was so potent. "If it had been raining," Dodds says, "that same match wouldn't have had an effect." Instead, a fire takes off because of the properties of the larger forest environment: the dryness, the density, the wind, the temperature.
The upshot of the study, Dodds says, is that "in the end, you don't have control over how people spread your message." The best way to increase the odds of person-to-person transmission of an idea is to make it a good idea and to give it "social worth," he says. "Some things are just fun to talk about."
Via the IHT
I hope the Beijing Olympics will be great for China and the rest of the world, but I'm quite sure that China's obsession to script and control everything will backfire. The Chinese government has already arrested many people who might cause upheaval, but the video below shows that protests or unscripted events might come from unexpected corners.
From the article in the IHT:
The matter in question arose last month when Hu Ziwei, a well-known Chinese television personality, burst onto the stage during a lavish ceremony where the state broadcaster, CCTV, was inaugurating its new Olympics sports channel.
There stood Hu's husband, Zhang Bin, who is also a well-known sports anchor, and suddenly, the neatly dressed woman began speaking in a calm voice about her supposed discovery of his love affair with another woman.
From the outset it was clear that Hu was a surprise guest, and her message, too, was way off script. "Next year is an Olympics year, and people all over the world will be watching China," she began calmly, her hands folded in front of her. Quickly, several men approached to try to get her off of the stage, but Hu held her ground, shaking off their attempts to grasp hold of her.
From the perspective of a government that obsesses over control of what is visible and what is not, what can be expressed publicly and recorded for posterity and what cannot, even in these first instants the makings of a nightmare were readily apparent. Voices could be heard offstage, "Please don't take any pictures," but it was already too late. Not only could one clearly hear the sound of snapshots being clicked off, but also within hours video footage was spreading on the Internet via Chinese Web sites, which the government attempted to block, and via YouTube, which it could not.
Hu continued, citing the words of an unnamed French diplomat, saying: "Until China is able to start exporting its values, it won't be able to become a great power. For us to appear so prim and proper, yet Zhang Bin can't even be brought to face his own - he won't even face his hurt wife. I think China, as a - to succeed as a great power - don't any of you have a conscience at all?" The men in suits approached yet again attempting to remove her, but the diminutive lady was having none of it. "You let me go," she exclaimed, pulling herself free. "We're so far from being a great country."
TED Talks are popular videos from the 15-20 minute presentations given by elite speakers at its annual event. They usually bring well-argumented and/or funny messages accross and TED's visual flair helps to make these videos inspirational and exciting to watch.
Now Big Think joins the fun with short 3 minute video interviews of public intellectuals in areas such as politics, law, science etc. Big Think is positioning itself as the ''Youtube of ideas'' and aims to trigger debates about issues that matter in this world. It claims to take a more bottom-up approach compared to TED. Another site offering intellectual videos is Fora TV. It is comparable with Big Think, though their videos are longer. All sites aim to implement social networking features, though I'm not sure if that is something to be so happy about...
Big think is not short of coverage upon its launch in part because former Harvard President Larry Summers is a minority investor. Click the links below for more on Big Think and other players in the intellectual video arena.
I checked out the site and thought I'd try and find a video related to something light: life and death. Unfortunately, there are no experts in this field yet?! I watched a video interview with Richard Branson on ''giving back to society'', but was quite disappointed. I think 3 minutes is very short to really say something and the speakers don't really seem comfortable either. Moreover, the added value of video becomes less when the message is so short without any backgrounds or slides to show. So great ''IDEA'' with potential but still poorly executed in in my opinion.