The comeback kid

2008-10-17 09:18

Alistair Fairweather

Say the name MySpace to most technophiles and they'll roll their eyes at you: "MySpace? So 2006! Haven't you heard of Facebook?"

It's true that MySpace teems with spammers, strippers and weirdoes, and that its younger, preppier competitor always seems to be one step ahead.

So when MySpace launched a self-service advertising platform (called "My Ads") last week, it seemed a bit like putting lipstick on a pig.

But a closer look reveals something surprising: MySpace is actually making money, lots of it. It made around $800m in its last financial year (which ended in June), and turned a profit - something unheard of in social networking.

Facebook, on the other hand, will be lucky to make half that, despite the fact that it recently surpassed MySpace in worldwide audience figures.

And while My Ads may seem like a lame copy of Facebook's much praised self-service advertising platform, it's full of the kind of subtle differences that could end up changing the game.

Targeting users

For one thing it allows "display" (ie image based) advertising and doesn't restrict users to text like Facebook does. They've also deliberately pitched the system at small businesses and individuals - allowing you to spend as little as $25 at a time.

But the killer feature is the way it lets advertisers zero in on their intended audience. Where Facebook allows you to target users based on what they say they like, MySpace targets them based on what they do.

A case in point: Facebook needs you to tell it you like indie rock bands, where MySpace only need you to visit a few band profiles before it connects the dots.

This difference may seem so slight as to be irrelevant but remember that the world's only internet superpower, Google, have based their entire business model around the way people behave and not around what they say.

So is this the holy grail of social networking revenue? It all depends on the quality of the results My Ads can produce. In online advertising clicks are everything - an unclicked advert is a wasted advert.

One of the problems with social networks is, despite the tantalising opportunity to "micro-target" users, the click rates have so far been appalling in comparison with traditional media sites. If MySpace's targeting model can improve this, the whole industry will change.

There's another lesson beneath the surface here: glamour and good business don't always go hand in hand. Sure Facebook has hogged the limelight for the last two years, but they're still losing money.

Making advertisers take note

That will change soon enough (MySpace have a two-year head start on them after all), but if you believe all the hype, then MySpace was dead and buried 18 months ago.

South African internet users never really took to MySpace - at least not in the same way as they did to Facebook. This says as much about our national psyche as it does about the sites. We prefer nice, clean, safe Facebook to grungy, smutty, rough-n-ready MySpace.

But luckily there is room in the world for more than one preference, and MySpace has more than enough reasons to make advertisers sit up and take notice - 150 million reasons in fact.

Send your comments to Alistair.

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