Industry Analysis Report
Jenny Orr 3604172
Industry Analysis Report
Why do social networking sites fail?
Social networking sites have become a part of daily life and have changed the way people communicate. They have changed the dynamics of relationships by providing a space for friends to communicate for free, regardless of distance. They have also allowed people with common interests to form friendships who might never have met. This form of friendship could never be possible without these new technologies. It would seem crazy to look people up in the phonebook and request their friendship, yet we do it on social networking sites all of the time. If social networking sites are this fantastic communication tool, why are some failing? To answer this question three sites will be evaluated The Hub, Friendster and MySpace.
One of the most discussed issues is how can social networking sites make a profit, Swartz raises the concern that some social networking sites struggle to make profits to match the billion dollar valuations placed on them. (Swartz 2008) Advertising is currently the main revenue raising feature of social networking sites. The advertising depends on the popularity and traffic of the site so it is important to discover what makes the site attractive or unpopular.
The Hub was a site created by Wal-Mart, one of the world’s leading retailers. However the Hub was a miserable failure. It was targeted at teenagers. “teens were formerly encouraged to upload photos and videos and create shopping lists of their most desired Wal-Mart” (Rosmarin 2006). The Hub only lasted ten weeks online. It didn’t appeal as much to teenagers as MySpace did, user profile information was sent to parents for approval before they could join up, something teens weren’t very fond of. Some profiles were clearly fake with some member’s interests including shopping at Wal-Mart to attract boys. Cashmore provides a quote from one of the fake profiles “I’ll school my way by looking hot in my Wal-Mart clothes…to catch a cute boy’s eye”. ‘(Cashmore 2006) The Hub was a shameless marketing attempt with users encouraged to have shopping lists on their profiles. The Hubs Failure is summed up by Rosmarin (2006) in one sentence ‘the lack of interactivity between users, heavy-handed corporate messaging, and parental notifications on the site used have hastened its shutdown. After all, why would teens spend their time maintaining a Wal-Mart profile when MySpace has none of the same restrictions?’
Friendster was launched in 2002 and was extremely popular to start with it ‘grew to 300 000 users through word of mouth before traditional press coverage began in may 2003’ (boyd and Ellison 2008). Friendster’s problems began with the site being unable to cope with its popularity, Friendster encountered many technical problems ‘Friendster’s servers and databases were ill equipped to handle its rapid growth’ (Boyd and Ellison 2008 p215). These weren’t users only issues with friendster. Friendster unlike MySpace was very rigid and required users to have their profiles set out in specific ways, in fact Friendster’s creator Jonathan Abrams ‘killed off anyone who didn’t conform to their standards, most notably ‘Fakesters’ and those with more creative non-photorealistic profiles’. (Boyd 2006) This made users feel alienated and destroyed their trust. Users were now happy to move to MySpace with the much friendlier Tom Andersonas. Friendster failed to evolve giving users limited options and ‘for a long time took away features rather than adding them’. (Boyd 2006) Friendster was seen as uncooperative, unfriendly, rigid and ruthless and so users stopped logging on, or deleted their accounts.
MySpace still is one of the largest social networking sites, as seen above MySpace has become home to many alienated users from Friendster. MySpace has survived so long by evolving its site with members, allowing them to hack the codes to create personalised backgrounds and themes using HTML. MySpace also encouraged changes and new groups, instead of expelling band pages and fan pages as Friendster did MySpace encouraged these new profiles and sold advertising space to promoters of clubs. (Boyd and Ellison 2008 p217). MySpace is also one of the few social networking sites to make a profit, cutting deals with Google worth 900 million and making money with ring tones, tickets and merchandise, (Swartz 2008) by creating ‘partnerships with major record labels Sony BMG Music Entertainment, Warner Music Group and Vivendi’s Universal Music Group’ (Swartz 2008). However MySpace’s popularity has started to fade against Facebook, which now has users spending more time on its site. According to Nielsen’s online in the United States alone minutes spent on Facebook increased 700 percent in April 2009 compared to April 2008. In the same time minutes spent on MySpace in April 2009 compared to April 2008 decreased by 31 percent. (Nielsen Online 2009) Unlike Friendster, MySpace has not lost its members due to any fault of its own, rather Facebook has increased its minutes spent by including applications and games. MySpace is still ranked as the second most popular social networking site (Nielsen Online 2009) and does turn more profits than Facebook. MySpace has succeeded in creating an online culture for a generation.
By evaluating these different sites it is interesting to find that reasons for failure are not solely focused on profit but also on user satisfaction. To be profitable social networking sites need to be popular. To be popular they need to invest time and money into creating faster connections while creating new features to keep users interested, and be constantly evolving with changing technology and trends. Some networks like Friendster failed to make users feel welcome. For social networking sites to succeed they need to adopt a marketing perspective, to create the sites around users want, not that of the creators.
References
Boyd, D. 2006, ‘Friendster lost steam. Is MySpace just a fad?’, Apophenia, Weblog March 21,
accessed 22/09/09 from http://www.danah.org/papers/FriendsterMySpaceEssay.html
Boyd, D. Ellison N, 2008, ‘Social Network Sites: Definition, History and Scholarship’ Journal of Computer Mediated Communication, vol 13. p.210-230
Cashmore, P. 2006, ‘Wal-Mart Clones MySpace Badly’ Mashable, Weblog July 18, accessed 10/09/09 from http://mashable.com/2006/07/18/wal-mart-clones-myspace-badly/
Nielsen Online, 2009, ‘Time Spent on Facebook up 700% but MySpace Still Tops Video’, June 2, 2009, accessed 23/09/09 from http://blog.nielsen.com/nielsenwire/online_mobile/time-spent-on-facebook-up-700-but-myspace-still-tops-for-video/
Rosmarin, R. 2006, Wal-Mart’s MySpace Experiment Ends’, Forbes.com, March 10, accessed on 10/09/09 from http://www.forbes.com/2006/10/02/myspace-walmart-youtube-tech-media-cx_rr_1003walmart.html
Swartz, J. 2008, ‘Social-Networking Sites Turn Users Into Profits’ USA Today, December 5, accessed on 24/09/09 from http://www.usatoday.com/tech/techinvestor/industry/2008-05-11-social-networking_N.htm
