Facebook is worried that this will enable groups of friends to easily pick up and move their social activity en masse to another network — or, even worse, that you won’t have to join Facebook to connect with friends on Facebook.

Why does Facebook fear this so much? Because Facebook’s social networking features are a commodity.

Even Facebook’s third-party applications will effectively become a commodity of sorts, in that developers will be able to use OpenSocial to make applications available on any social network. So the applications themselves aren’t commodities — but a social network having the application will cease to be a differentiator.

Facebook fears the openness of OpenSocial because it doesn’t really have a differentiated product. All that differentiates Facebook for an individual user is the presence of that users friend’s on Facebook — which forces them to use Facebook to connect with them.

But if OpenSocial makes it possible for user profiles to communicate across networks, then Facebook becomes just another set of generic social networking features, supplemented by third-party applications also available on any other network.

So why did MySpace join? Well, for one thing, they don’t have a $15 billion valuation to support, so they can afford to bet on the evolution of social networking.

And what is the evolution of social networking?

I think it will be the decommification of social networks, which will increasingly offer features customized to particular users, which complement, rather than compete with other social networks a user may belong to.

If two social networks target the same definable groups of users with unique features and value propositions, OpenSocial makes all the sense in the world. OpenSocial connections can enhance the user experience (heaven forbid we put users first) by integrating the experience across networks and making it easy for users to manage multiple profiles.

For the social network itself, creating an OpenSocial connection with a complementary network can be a form of co-marketing/co-registration. Even better, if there are active read/write connections between networks, data created in one network can enhance the other network its connected to — and vice verse.

Only a social network like Facebook that has no unique value proposition and depends instead on a traditional customer lock-in and monopoly control strategy need fear OpenSocial.

And even then, I think resistance will ultimately prove to be futile. (I’m tempted to quote Eric Schmidt’s “don’t bet against the Internet,” but realize what a cliche that would be — oops, I guess I just did.)

The web advantages companies like Google that can harness network effects and profit from liquidity in the system. That’s what OpenSocial will do for social networking.

Of course, none of this means there won’t be a market for standardized social networking features — but the big player in that market may turn out to be Ning, whose white-labeled social networks are able to differentiate themselves based on their brand identity. Ning social networks can have a unique purpose, i.e. the REASON why people connect — compared to Facebook, where the reason for joining is generic, and even the reason for “friending” someone is generic.

Not surprisingly, Ning has embraced OpenSocial for applications, and I wouldn’t be surprised to see them enable OpenSocial connections among their networks and with third-party networks.

If Facebook builds its business around a closed, undifferentiated, generic network, it will quickly become an old mass media company.

Tweet This Post  Share on Facebook

But if Google is going to go for it, the main issue they need to analyze carefully is not price or valuation (given their purchases of YouTube and Doubleclick, we all know Google is willing to pay whatever it takes to do a deal). Instead, they will need to resolve the strategic conflict that an acquisition of Facebook will pose on their $900 million agreement with Rupert Murdoch’s MySpace. Which, by the way, has yet to be formally executed, as I understand.

Now let’s remember, the key reason that Google offered such a rich deal to MySpace actually had little to do with social networking, per se. Rather, what drove the value of the deal was the fact that MySpace was increasingly a source of downstream traffic to Google.com, the search engine. At the time, MySpace was responsible for almost 11% of Google’s search traffic.

But if Google ends up owning Facebook, what happens to the Google/MySpace deal? Is there language in the agreement that would prevent Google from making such a move? Much to my surprise, there is no such non-compete clause… so it seems Google is free to go directly into competition with MySpace (Orkut notwithstanding) without violating any terms of the contract.

So will Murdoch just sit idly by and do nothing? Not likely. Under such circumstances, there’s a good chance that Murdoch will find a way to back out of his Google agreement. Moreover, he’s likely to follow such a move with another countermove that awards MySpace’s search traffic to a Google competitor. It’s possible that such a scenario was a part of the recent overture by Murdoch to merge MySpace for 25% of Yahoo! (e.g. the promise of MySpace’s search traffic being diverted to Yahoo! could potentially have a material impact on search market share and monetization).

A year ago, I had written that Google woulda, coulda, shoulda bought MySpace when it had the chance. How interesting a twist of fate if Google ends up buying Facebook instead, and applies the knowledge it has gained dealing with MySpace to the benefit of Facebook.

At the same time, such realignment in the industry could force Murdoch & MySpace to get into bed with Yahoo! And if that happens, Yahoo! might end up being in the cat-bird’s seat (without having to give up 25% of itself in a merger). After all, even though Facebook has been getting all the buzz lately, MySpace’s enormous traffic and ad inventory could end up bolstering the monetization potential of Yahoo’s Panama to new heights. At the end, it could end up being a win for all parties concerned.

Tweet This Post  Share on Facebook

Late last week, the Financial Times reported that MySpace was likely to respond to Facebook’s much-hyped F8 Platform initiative with its own third-party application/widget development program. Last week also brought forth an interesting debate, initiated by Jason Kottke via his aptly titled post “Facebook is the new AOL”, questioning whether the Facebook Platform was truly “open” or in reality a “walled garden”… an issue MySpace will have to tiptoe around gently as they specify their own API framework and policies.

In my mind, however, the central issue that MySpace needs to address competitively is not necessarily one of policies concerning technology (e.g. being open or closed), but rather it’s one of monetization policy. Specifically, what will MySpace’s policy be in terms of how third-party developers can monetize? As we know, Facebook’s position is that third-party developers can monetize their applications in any way they wish and they get to keep 100% of the revenues generated. Will MySpace do the same, or will they want a piece of the action (as I had speculated back in January over at GigaOM).

Although it may seem counterintuitive, particularly in light of the fact that outside developers can keep *all* the money they earn within the Facebook ecosystem, I would strongly urge MySpace to base their upcoming program around a revenue-sharing model. Put simply, MySpace should take a cut of the revenues that third-party developers generate. But to ensure a win-win, the key is to create a model where third-party developers can actually net *more* money inside the MySpace economy (even after sharing) than with Facebook. And this can be accomplished if MySpace leverages a clear advantage that they currently have over Facebook… re-focus their ad sales programs and their growing ad sales force to sell the inventory generated by third-party apps/widgets (in addition to the core MySpace ad inventory). In other words, MySpace should essentially share its own monetization engine with their outside developers.

You see, even though Facebook is currently enjoying the benefits of having thousands of new applications on its platform, most of those third-party developers will go out of business if they cannot eventually make money. And the reality is, except for a few well-funded ventures, the vast majority are starving long tail (often one-man) development shops. So when it comes to monetization, which requires ad sales capability, 99% of them are not equipped with the necessary resources.

At the end of the day, monetization is the big problem, and MySpace is positioned to solve it better than Facebook. After all, for the developer, sharing a percentage of some revenue is better than keeping all of nothing.

Tweet This Post  Share on Facebook

Think Charlie’s Angels and Starky Hutch — and think “adapted for the web”:

Sony Television is planning in June to introduce an Internet-based service called the Minisode Network, initially offering the mini-shows for an exclusive run on MySpace. (The company may consider establishing a separate Internet channel called the Minisode Network later.)

However and wherever it appears, the network will consist of a lineup of tightly edited versions of shows lifted off the shelves of Sony’s television library. These are not clips of the shows, but actual episodes with beginnings, middles and ends, all told in under six minutes.

Least you think this is benign:

Sony is even making a mini-version of “Ricki Lake,” one of its syndicated talk shows. “It’s great,” Mr. Mosko said. “The people get introduced, there’s a big fight, then they come together, and cry and hug. You get everything in five minutes.”

And how do we deal with this tsunami of content? Search, right? For when you go searching for Starsky and Hutch?

Sony’s Minisode Network is going to get funneled through social networks like MySpace, where user-generated content will achieve the ultimate irony as a vehicle for stale old professional content.

The end result, however it plays out, will be even MORE content competing for scarce attention, making everybody’s slice of the pie that much smaller.

Tweet This Post  Share on Facebook

MySpace blocked Photobucket because it was serving ads on MySpace without paying MySpace — the reaction in the blogosphere has focused on the implications to Web 2.0 business models — see Om Malik’s 5 lessons and Nick Carr’s sharecropping analogy.

The more interesting question to me — and the one that will have the greatest business consequences — is how do MySpace users feel about this? Clearly, most of them don’t know nor could care less about the spat over who controls the ad revenue. All they know is that their Photobucket videos suddenly went kaput.

Last year, I might have argued that this was a bad omen for MySpace. Now, I’m not so sure. After all, video hosting is fast becoming a commodity — MySpace users can turn to dozens of different service providers to replace Photobucket.

I bet most MySpace users are savvy enough to know it’s not really THEIR space — and I bet most of them don’t care.

Tweet This Post  Share on Facebook

The nature of this transformation suddenly crystallized for me when I read Tom Foremski’s piece on the new West Coast/East Coast media industry divide. Tom seems to be focused more on media as defined by publishing, since New York has traditionally been the center of the publishing world, while Hollywood has been the center of the video-based media industry. Regardless, I think Tom gets it half right, because the schism in media has nothing to do with geography.

The real divide now emerging is between companies that create original content and companies that create platforms for aggregating and distributing that content. Newspapers embody the old media world where content creation, aggregation, and distribution were inextricably linked. But the digital media revolution has made it possible to separate these functions.

For traditional media companies, original content creation still straddles both coasts, but geography is quickly becoming irrelevant as an army of newly empowered individual and small enterprise content creators are storming the web from every corner of the globe.

The radical shift in the newly disaggregated business of original content creation is that, with so much competition (one might even call it a content creation bubble) and no control over distribution, content creation is no longer an easily scalable business — in fact, many players in the new content creation game are not in it to build scale business, or even to make money at all.

Individuals can now make a good living as content creators, without ever creating or becoming part of a scale content business. What’s more disruptive, however, is that in the market for original content, the attention economy is draining dollars out of the cash economy. There remains a zero sum game for consumer attention, so for every minute a consumer spends with content created by an entity whose compensation is in form of attention, there’s a minute not being spend on content created by a for-profit entity.

In contrast, the content aggregation and distribution side of the divided media industry has all the advantages of scale, with the technology-enabled platform (e.g. MySpace, Facebook, YouTube, search) serving as the organizing principle for the new scalable media businesses. Content creation is asymptotically approaching commodity status, while platforms that can effectively aggregate content and allocate scarce consumer attention can unlock immense value in the new media marketplace.

YouTube is now ground zero for the battle over the new scalable half of the divided media industry. Content companies like Viacom who have lost all of their distribution leverage are fighting YouTube to control the new platform-based media economy. The future of media will be determined by how well legacy media companies survive the unbundling of their business models, how much better legacy companies like News Corp who have acquired a platform (MySpace) can restructure their business, and the degree to which the new native platform media companies like Google can position themselves to dominate the new media landscape.

Tweet This Post  Share on Facebook

Randy Mountz, former vice president of sales for MySpace.com’s Midwest region, has joined PayPerPost as the company’s vice president of sales, a new position.

Also notable:

In a novel move, PayPerPost utilized the its own platform to assist in recruiting Mountz. The company paid a handful of the consumer content generators in its network to create Web videos designed to entice Mountz to join the PayPerPost team. The videos, posted on YouTube, demonstrated the power of the platform to Mountz, and were instrumental in attracting Mountz to his new Position.

Who knows what the back-story is, but on the surface it would seem that Mountz’s decision to sell an ad format that can result in government fines isn’t exactly a ringing endorsement of the growth opportunities in ad sales at MySpace. Of course, this deal appears to have been done before the FTC announcement…still interesting, given the endless MySpace worship in the media (such as all the fuss over MySpace’s web-design-driven ascension to the #1 page-view spot), you’d think they wouldn’t have trouble retaining anyone if they were having runaway success in “monetization.”

Tweet This Post  Share on Facebook

So while everyone was watching Google engage in “frantic” negotiations with rights holders for all of that user “appropriation” on YouTube, MySpace was quietly pursuing its own rounds of negotiations — one of which has now blown up in Rupert Murdoch’s face. Universal Music has slapped MySpace with a lawsuit that may well determine the future of user-appropriated content. (Perhaps Sumner Redstone isn’t regretting the loss of MySpace quite so much today.)

Cynthia Brumfield says the lawsuit is a “good thing,” and I agree:

With two giants duking it out in the federal courts, the likelihood is good that some kind of legal precedent will be set. Maybe video file sharing sites (and other video-enabled Internet businesses) can finally get definitive legal ground rules, whatever they may be, providing a higher degree of certainty so that the industry can move forward.

In addition to dispelling the spectre of legal uncertainty, I hope we can also get past all of the disingenuous buzzwords and hype talk. At the end of the day, whenever anybody uploads or posts something to the web, it’s just a form of publishing. What’s radical about the new digital reality is that I can publish anything that I made — and I can publish anything that anybody else made.

Basic common sense tells you that if I were to take all of the content from another blog, publish it here, and then run ads against it, that would be wrong. Much of the tangled web we now face results from the euphemistic obfuscation of terms like “user-generated content.” If we call it what it is — for example, people streaming music from their MySpace pages while MySpace runs ads on those pages — then we can have a clear debate about the right and wrong of it.

Here’s another great example of how too much hype is making people talk nonsense:

Social media Web site Gather.com said Friday it completed a $10 million round of financing led by Pilot House Ventures that also included media giants Hearst Corp. and McGraw-Hill Cos.

Other investors include Jack Connors, chairman of advertising agency Hill Holliday and Gather.com CEO Tom Gerace and his family. The community Web site, which invites online chatter about politics, food and the arts, said it will use the funds to partner with leading media properties, as well as make plans for international expansion.

“Hearst recognizes the trend that audiences are increasingly consuming content created by people,” said Kenneth Bronfin, president of Hearst Interactive Media.

“Content created by people” — as opposed to content created by journalists and other non-people.

Please put the Kool-Aid down and back away slowly.

Tweet This Post  Share on Facebook

“good bye myspace.

I’ve always hated you.

I just never had what it took

to leave”

Ms. Thompson belongs to a fringe of Internet users now renouncing MySpace and other social-networking sites — not in spite of their popularity, but because of it. That highlights a dilemma facing News Corp.’s MySpace and Facebook Inc.: While it takes a critical mass of users to make these sites work, having too many users alienates some, especially when they attract an ever-growing cacophony of advertising and in some cases, spam.

There’s nothing new about these observations, and it’s still not clear whether this is just minor ongoing churn or the tip of the iceberg. The article cites Nielsen/NetRatings data that shows traffic drop-off, but it’s written off as seasonal.

The article also cites a growing spam problem:

There’s no question, however, that MySpace’s recent popularity has brought with it a proliferation of spam that has annoyed some users. Many advertisers take advantage of the “friend request” function and send out requests that are really just advertisements. And programs have cropped up that can automatically send mass friend requests to MySpace users — in short, a new generation of email spam. Sites with names like FriendBot.com and FriendAdder.com sell the programs starting at $19.95.

I think the real question is whether the success of the MySpace and Facebook brands will allow them to maintain their dominant positions, or whether going mainstream will ultimately ruin their appeal for the hip digital generation.

Last year the trend to watch was social networking. This year it was online video. Next year one of the big trends to watch will be whether the dominant brands have staying power.

Tweet This Post  Share on Facebook

Why does Google dominate search? Brand. Google’s original search brand is so successful that they can’t even get people to use their vertical searches, e.g. Maps, Images, Video, Books, even when those tool better serve users needs. Use of Google’s core search is no longer a function of whether Google is better (in many cases it’s not). People use Google the same way they use P&G products – out of brand loyalty and often just out of habit.

Why did YouTube beat Google Video? Brand. Notably, it’s the community that defined the YouTube brand as much as the technology. Ultimately, it was the strength of the brand — and Google Video’s inability to compete with the brand’s dominace — that drove the acquisition. What makes the top blogs so successful? Brand. Again, community is a key driver, which you can see in the active comments on successful blogs. In many cases, blog brands are built around individuals, but they are brands nonetheless.

Why were Weblogs Inc. and Gawker among the first successful blog media companies? Because they built brands. I’ve heard Jason Calacanis say the reason he didn’t aggregate existing blogs, as Federated Media is doing, is that he wanted to own the brands.

Why is Yahoo the largest portal? Brand. Why do so many people shop at Amazon despite the proliferation of online shopping alternatives? Brand. Why is Digg so popular? Brand — again, a community-defined brand, but a brand nonetheless.

Even the social networking wars are being fought over brands. Here’s Jay Stevens, vice president of sales and operations at MySpace:

“Ultimately people identify with [online] publishing the same way they do in the offline world. The newspapers we read and the television channels we view are representative of what you are about,” said Stevens. He went on to say that there is some interaction but that people use different social networks for different purposes. “Some people might be on Bebo to communicate with friends but will then go to MySpace to check out what’s new in popular culture.”

A media brand can be an individual voice, a social networking platform, or an online software application. It’s undeniable that traditional media brands no longer have a monopoly over our attention — but as Jay Stevens points out, the fundamental dynamics of media brands hasn’t changed. We self-identify through our media brand choices, which now include all of the technology brands we use. Increasing, there is no meaningful distinction between technology and media brands in the consumer space – they all compete for our attention. We are defined by the devices and applications we used as much as by the content we consumer. I’m an iPod user, Gmail user, Pandora user, Firefox user, Basecamp user, Feedburner user, Amazon shopper. I listen to the Gillmor Gang and read Rough Type (and without my head exploding). I am part of the TechMeme community.

It all comes back to brand. There may be new drivers of brand loyalty in media, and the barriers to building a brand may have fallen away. But brands still rule.

Although I am still the sole author of this blog, much of the value has accrued to the Publishing 2.0 brand, which you can see in a (now brand-defining) Google search.

Domains are brands, which is why domain investing has become so lucrative.

All of the Web 2.0 companies, with their oddball brand names, are fighting a battle for brand dominance. Are you a Del.icio.us user or a StumbleUpon user? Are you a PodShow listener or a PodTech listener? Do you use YouTube or, well, I guess that battle is over.

Despite all of the proliferation of content, media/technology is still largely a winner take all industry. Google. Yahoo. Amazon. Ebay. YouTube. MySpace. These are the dominant brands.

Media/technology companies are not only competing for our attention, they are competing for our loyalty. Consumers may be in control, but they are still creatures of habit who seek the comfort of familiar brands.

At the end of the day, brands are about trust. Which brands do you trust? Which brand has a community that you can trust, a community where you can belong?

Whether you are a blogger, a traditional media company, a new media company, or a technology company, your brand is your most valuable asset. Nuture it. Grow it. Form a vibrant community around it.

But never lose sight of your brand.

Tweet This Post  Share on Facebook

The analysts at Veronis Suhler Stevenson have put some numbers behind this school of thought:

Traditional US media companies are increasing their share of the fast-growing online advertising sector relative to internet rivals such as Google and Yahoo, according to a new study.

In one of the first detailed reports of the relative positions of traditional media companies and their online competitors, Veronis Suhler Stevenson, the private equity group, has shown that, contrary to many people’s expectations, media companies are holding their own in the digital space.

VSS will report on Tuesday in its annual comprehensive study of the media business that this year, of the $22bn expected to be spent on online and mobile advertising in the US, traditional media groups’ share is forecast to be 37 per cent, up from 23 per cent in 2000.

By 2010, when internet and mobile advertising is due to reach $44bn, traditional media companies are expected to capture $17bn, or nearly 39 per cent, of the total.

If they are smart, the MySpaces and YouTubes of the web can capture a whole new bucket of “social” marketing dollars, the same way that Google did with search marketing. Some traditional media companies will grow or hold onto their share of online ad dollars by acquiring these social media/user-generated content sites — News Corp is of course the de facto poster child with its acquisition of MySpace.

But another key to traditional media companies’ success may be the “quality” of their content (and I put the best blogs and other independent, high quality content producers in this category). The theory here is that the old symbiotic relationship between content and advertising will survive online (even as advertising increasingly becomes content), and that companies will continue to see a direct relationship between perceptions of their brands and perceptions of the content and context where their brand messages appear.

Of course “quality” of content is in the eye of the beholder — but like judging pornography, we all make instinctive judgments about content quality — how many brands do you really think will want to ride along with a video of someone lighting a fart (amusing as some may find such videos)?

Google is many ways proof that content quality still matters online — on Google’s search results page, the measure of quality happens to be relevancy, but it’s a measure of quality all the same.

Tweet This Post  Share on Facebook

What pains me about such “strategy decay” (as Umair would put it) is that it doesn’t have to be this way. All MySpace needs to do is look at the central driver of its own success — letting users create their own spaces. So having a bunch of editors create a one-size-fits-all printed “space” is running full tilt in the opposite direction.

Instead, why not create a publishing tool that lets MySpace users convert their pages and their friends’ pages into a print publication? The tool could generate PDF files that users could print out on their own — OR, MySpace could pursue some actual innovation, in the area of cheap, print-on-demand technology, which might allow groups of friends to create magazines that MySpace would print and mail to them — instead of that one-size-fits all magazine that nobody will want because its so diametrically opposed to what MySpace is all about.

Assuming that MySpace can enable the publication of magazines that users actually want to read (because they created them), what about the business model? Well, MySpace could charge users to print their custom magazines, but I’m not sure if being a printing press is such a great business (unless MySpace really innovates on the print-on-demand front). MySpace could certainly sell ad space that is automatically inserted into each custom publication — which rationalizes how the users are able to get them for free — same deal as all other free Web 2.0 services. OR — MySpace could sell advertisers into an ad page pool and then let the USERS choose which ads to put in their publications. Such user placement would be a great implied endorsement to friends who read each other’s custom publications. Even better, give users tools to create their own ads for brands they use.

Of course, there’s the problem of MySpace having no control over the content that their advertisers appear next to, which might put the same cramp in their print ad sales as it has in their web ad sales. Then there’s the question of why bother with print at all when digital media is so much more of an efficient, flexible and networked form of custom publishing.

Tweet This Post  Share on Facebook

Now, advertisers say the company is stepping up its efforts to convince big clients using MySpace’s free Web pages, known as profiles, to become paying customers as well.

“MySpace has started to reach out to companies that are setting up commercial pages on the site, encouraging them to reach some kind of financial agreement and forgo the free ride,” says Jeff Lanctot of aQuantive’s Avenue A|Razorfish online advertising agency. “While this could include paying to have the page up, I think buying an ad package to support the commercial page is also a reasonable solution.”

For example, this Wendy’s Smart Square page has 82,025 “friends” on MySpace (you’ve got to love the “About Me”).

I don’t know whether Wendy’s pays already for this page, but if they do, you have to wonder why. And if they don’t, you can’t envy the sales rep who has to call them up and convince them to pay. And what if Wendy’s won’t pay? Will MySpace have to tear down the page? That would be a great advertiser relations program — policing for unpaid commercial pages and tearing them down. You can imagine the trade press headlines.

Google obviously thinks it can effectively monetize MySpace — and I think it would be far more interesting to watch and learn from how MySpace succeeds than to watch it fail (despite the inevitable morbid train wreck fascination). But when I read things like “encouraging [advertisers] to reach some kind of financial agreement and forgo the free ride,” I really can’t help but continue to wonder.

Tweet This Post  Share on Facebook

In a conference call, FIM executives noted that a very large number of people leave MySpace to go to Google. According to data collected by Hitwise, an Internet traffic tracking service, nearly 10.8% of Google’s traffic was coming from MySpace.com for the week ending July 29, 2006. Had Fox gone with Yahoo or Microsoft, it could have been a serious blow to Google.

It also gives them access to inventory to sell more ads, and thus become even a bigger player in the fast-growing online advertising business. But the ad-inventory that can be sold is unlikely to come from MySpace. Rich Greenfield of Pali Capital notes that most of the safer (read advertiser friendly) “Myspace-programmed” sections such as the homepage, main Music page, main Comedy page, etc are off limits for Google. Eric Schmidt, Google CEO during the conference call said that they would not serve ads on all MySpace pages and in fact they will let a lot of ad inventory go unserved.

First, I disagree with Om that FIM’s going with Yahoo or Microsoft could have been a serious blow to Google because of the loss of traffic from MySpace. Here’s what Bill Tancer of Hitwise observes about the 10.8% statistic:

Since over the last year there has been no formal relationship between the two companies, this high volume of traffic flowing from MySpace to Google would most likely be the result of users using their Google toolbar or manually navigating to Google while engaged in their MySpace session.

Google gets 10.8% of its traffic from MySpace because so many Google users are also MySpace users, and so they just happen to be on MySpace when they decide to do a search. Does that mean these MySpace users would suddenly stop wanting to use Google if Yahoo or Microsoft was the default search for MySpace? Unlikely. Perhaps Google will gain more search users from other FIM properties, but I’m not sure that was worth paying for.

So what about the advertising component of the deal? As Om observed, “the ad-inventory that can be sold is unlikely to come from MySpace” — Google is even more savvy than most corporate advertisers when it comes to avoiding ads running next to questionable content.

Through Om, Robert Young speculates:

“The real story here (in my opinion) is how Google is now going to adjust/modify their ad network to optimize for social networks.”

It seems on the face of that there should be a huge opportunity to better “monetize” social networks, but I don’t see how this deal is going to make the problem of uncontrollable MySpace content any easier to solve.

MySpace still can’t get more than $1 for a big chunk of its page views. Maybe Google can figure out how they can do better…good luck!

Tweet This Post  Share on Facebook

In case you’re not among the 5 million+ people who have seen it, Grobe and Voltz created an immensely clever and entertaining performance video that channels the explosive power of Mentos added to Diet Coke:

The video that you see above (press the play button after it loads) has appeared on YouTube and Google Video, but not with the permission of Grobe and Voltz. I got this code from their site, EepyBird, where they ask users:

Please do not post our videos on sites like YouTube and Google. [Emphasis theirs]

But why wouldn’t they want their video uploaded onto the immensely popular YouTube?

Because YouTube isn’t paying them a dime. Neither is Google.

Instead, Grobe and Voltz are distributing the video through Revver, which shares with them half the ad revenue generated by THEIR (i.e. Grobe’s and Voltz’s) content.

As BusinessWeek reported:

It took eight months for Fritz Grobe and Stephen Voltz to mastermind a now iconic Web video that shows them creating intricate fountains of soda by dropping 500 Mentos into 100 2-liter bottles of Diet Coke. The video became an instant hit after it was published in June on Revver, a service that shares ad revenue. Within days, bootlegs showed up on Google and YouTube. Voltz, a civil litigation lawyer, figured out the process for getting the videos removed. But as copies kept reappearing, Voltz learned that he had to keep contacting YouTube to take down each new version.

The Mentos/Diet Coke video was seen 5.5 million times on Revver and made Grobe and Voltz $30,000. But Voltz estimates they lost another $30,000 to pirated copies. And for several days recently, blogs buzzed with attempts to sort out the rights of artists to control uploaded videos. As the prospect grows for making money online, what started as a lark for many is becoming all too serious.

User-generated content is going through a novelty phase, where most “users” are content with attention as a form of recompense for their efforts. But for savvy “users” — or in this case video production artists, let’s get real here — getting paid in attention while hosting platforms like YouTube get all the take-to-the-bank revenue is sheer lunacy.

To all the Web 2.0 sites that think they are going make a fortune off of “free” user-generated content — it’s the users calling…they want their money. And if you don’t give it to them, they are going to take their content elsewhere.

UPDATE

Just came across this Heather Green post from a few days ago about Ze Frank’s Video Blog:

Frank is deliberately trying to create a show and a brand and he wants to figure out a way to support himself. That’s why he chose to upload his videos on Revver, a videos sharing service that shares revenues. But just as important, he’s trying to keep control of the archive of his shows so that sometime in the future he can figure out a way to make money with them.

Heather also references Amanda Congdon’s appeal regarding videos posted to Amanda UnBoomed (this one is very funny and worth watching):

Please do not upload my videos to YouTube or any other video hosting site that reserves the right to make commercial works out of other people’s vids. This video falls under the creative common non-commercial sharealike license. Thanks for understanding.

Ze Frank calls this trend a “coming of age” — indeed, it’s time for all the Web 2.0 business models to GROW UP.

Tweet This Post  Share on Facebook

Anyone who attempted to visit Publishing 2.0 yesterday afternoon found, well, nothing. My web hosting service, Apollo Hosting, experienced some kind catastrophic meltdown. I know there’s been a lot of that going around, but in the case of the Apollo, this was the last straw for me. Why? Because it wasn’t the first time it happened. Apollo Hosting has failed my reliability test — I’m currently in the process of moving Publishing 2.0 to another hosting service. I don’t know for sure whether the new host will be more reliable, but so far their customer service has been great.

It’s not that I expect my hosting service to be without flaw, but after this last outage, I just lost faith, and Apollo gave me no reason to keep the faith. Part of the problem I had with Apollo Hosting is that their tech support people never seemed to understand why I was so upset when my site went down — even a simple apology would have gone a long way. No technology is infallible — the key to customer loyalty is to take it VERY seriously when things don’t work.

Another service that seems blind to the pitfalls of things not working is Technorati — many bloggers have complained about the Technoarti’s failure to update link counts in a timely fashion. And in Technorati’s defense, they are dealing with an IMMENSE volume of data. But you’d think that they would have used the recent relaunch of the site to fix some of these problems once and for all.

Alas, here’s what I’ve found over the last several days:

Again, I know it’s a huge amount of data, but how many YEARS is it going to take to get it right? If I were Technorati, I’d make data accuracy a top priority.

But why does it matter, you may ask. Technorati is clearly aiming at a mass audience, so why does it matter if they screw up bloggers’ ego stats? The average user won’t ever notice.

Well, one reason is that when blog readers see bloggers badmouthing Technorati, they may be more likely to check out Sphere or other new options.

And it’s just bad form. It’s okay to have hiccups and blips, but systematic suckiness is a great way to destroy a brand.

Just ask Microsoft, the undisputed king of sucky technology — I cannot tell you how many four letter words I hurl at Microsoft on a near-daily basis. I expect it not to work. And if professional circumstances ever allow me to switch to Apple, I will do so in a heartbeat.

David Sifry seems to understand the bucking bronco he’s riding with Technorati’s technical problems:

Part of this work is also to make things simpler and more stable, so that we can understand and respond to all of your support requests. Hopefully, it’ll also reduce the confusion! I know that some folks have sent in support tickets that we haven’t answered. If you’re in that camp, I’m sorry. I hope that with the back-end and front-end changes, you’ll find Technorati more usable and easier to understand. Give us another try.

For his sake, I hope they can FINALLY get it right.

MySpace is playing a similar risky game with their technical suckiness — when a search for “MySpace technical problems” turns up thousands of results, it’s clear that they are depending on users’ expecting less from technology, not more.

The explosion of web-based technology is undoubtedly a huge opportunity — but it is also a huge pitfall. Beta is fine, and working out the kinks is fine — but at some point, it has to just work.

UPDATE

Just came across this from Data Mining (via CrunchNotes):

I’ve just written a long post titled ‘Technorati: None – None More Broken’ (title for Spinal Tap fans). I couldn’t bear to post it

There are hundreds of posts like this out there, with more everyday.

Tweet This Post  Share on Facebook

MySpace seems to offer a chance for companies to take their marketing into new, potentially more lucrative territory, by becoming, in effect, members of their customers’ network of “friends”. A growing number of firms have established their own pages on MySpace, to which users can link. In the process, some are getting into bed with some unlikely partners. Earlier this year, for example, Unilever, a consumer-goods giant, hooked up with Christine Dolce to promote Axe, a deodorant. Ms Dolce, who goes by the alias ForBiddeN, boasts around 900,000 “friends” who link to her MySpace page. Bleached, buxom and with impressive marketing savvy, she is arguably the most successful brand to emerge from MySpace, and has already launched a line of clothing.

That made her perfect, Unilever concluded, to draw in the 18- to 24-year-old lustful lads to whom Axe is shamelessly marketed. So Ms Dolce hosted an interactive game, called “Gamekillers”, based around dating tips and designed subtly to promote Axe. Some 75,000 MySpacers signed up for it.

It’s not clear whether MySpace is getting any revenue from ForBiddeN’s Axe deal or any of the ads she runs for her own products. My guess is if they are, it’s not a significant percentage of the total dollars in play (please let me know if you’ve heard otherwise).

The risk to MySpace and other social networks is that savvy users like ForBiddeN will monetize the attention of other MySpace users and cut MySpace out of the loop.

MySpace is serving ads on ForBiddenN’s page:

But I’ll bet Christine Dolce’s own ads are getting a lot more attention:

So what if MySpace tries to strong arm their way into the loop?

The users will just go elsewhere. Ask Friendster. (Or MySpace users who found their accounts missing.)

There is also an opportunity for ad networks to cut out the social network middleman — uEndorse, for example, is creating an ad channel that allows social network users to chose ads that appear on their pages and to endorse those commercial messages.

As I’ve said before, I think the big opportunity is in giving users a piece of the action.

Users will increasingly want to monetize rather than BE monetized.

Donna Bogatin (one of my favorite skeptic bloggers) does some back of the envelop math to estimate that MySpace is currently able to squeeze about $2 out of each user on average:

Using very rounded numbers, here is a “quick and dirty” analysis:

* MySpace 2005 acquisition price: $580 million
* MySpace 2006 “friends” user base: 100 million
* MySpace 2006 ad revenues: $200 million

MySpace acquisition price reflects an approximate multiple of $5-$6 per “riend.”

MySpace is currently generating approximately $2 in revenue per “friend.”

This assumes, of course, that MySpace is able to act as the intermediary for each user’s attention…but when you live by the “users in control” sword…

UPDATE

According to the WSJ:

Popular members like Ms. Dolce represent something of a dilemma for MySpace. The site says it has no problem with the photographs and content on Ms. Dolce’s page, which, while racy, stop short of being pornographic. Recently, however, MySpace, which is owned by News Corp., has been working to promote a family-friendly image to appeal to potential advertisers — some of whom could be leery of sexually suggestive pages like Ms. Dolce’s.

Ms. Dolce’s commercial deals have occasionally run afoul of MySpace’s rules. The service doesn’t allow using the network for direct commercial gain; because of the site’s regulations, Ms. Dolce is prohibited from sending mass messages to her MySpace friends about the products she’s paid to endorse.

And yet Dolce is running ads for her own products on her MySpace page.

Why is it that information on the economics of MySpace is always so sketchy and fuzzy?

Tweet This Post  Share on Facebook

MySpace

Musicians don’t get paid for music played on MySpace (via Umair):

The most popular web site in the United States owes its phenomenal success to a canny exploitation of music. But while sound recordings command a performance royalty – the rules are optional in the exciting world of new media. So while composers get rewarded when music is played in hotel lobbies, clothes shops and pubs, they don’t get a penny from it being played, and endlessly replayed, over MySpace’s network.

It’s all very much in keeping with the new feudal economics of “Web 2.0″: the serfs must be grateful for the hospitality of the proprietor. As PlayLouder’s Paul Sanders noted last week, plenty of people appear to be profiting from digital music – except the people who create it.

Musicians like Billy Bragg have taken notice and have walked away from MySpace rather than grant the “non-exclusive, fully-paid and royalty-free, worldwide license.”

YouTube

The deal for video sharers on YouTube is just as raw, according to new terms of service (via Boing Boing, via Listening Posts):

“…by submitting the User Submissions to YouTube, you hereby grant YouTube a worldwide, non-exclusive, royalty-free, sublicenseable and transferable license to use, reproduce, distribute, prepare derivative works of, display, and perform the User Submissions in connection with the YouTube Website and YouTube’s (and its successor’s) business… in any media formats and through any media channels.”

Google

The new AdWords landing page quality score policy is clearly intended to wrestle away control of affiliate marketing from savvy AdWords users like Graywolf by artificially inflating minimum bids, with “user experience” being used as a smokescreen:

So what happened? Well I increased my bid, my thinking was with less competition I might get more conversions and afford to be able to pay more (Although tripling the price overnight is clearly excessive). In an effort to regain my lower price I made some changes to increase the “user experience” the customers now started meandering all over the site without purpose, they lost the plot. To make an analogy I paid triple price for my farm animals and threw open the fence and let them wander off into the sunset. Gee thanks Google, I have to say improving the user experience pretty much sucked!

I have yet to hear of anyone who requested a re-review have their prices lowered and adjusted down. So stop hoping for a miracle and stop the hemorrhaging. Move on and try something different, you may learn something if you don’t think like an engineer …

I think there’s more than a bit of coincidence in this trend of users getting screwed — Web 2.0 wants users to THINK they are in control, but then these companies use heavy-handed 1.0 tactics to maintain control of the profits.

I’ve written before about the 2.0 exploitation of users, and the argument I always hear in return is that users don’t really care about making money — they are just doing it for attention or out of the goodness of their hearts.

Jason Calacanis called this bluff with his offer to pay Digg users to work their magic for Netscape. Based on the reaction of the users over at Digg commenting on my Digg vs. Netscape post, I don’t know that he’ll get any takers in this round. But Nick Carr made the key observation here:

I think that what Calacanis is getting at is that the reason “social media” has existed outside the price system up until now is simply that a market hadn’t yet emerged for this new kind of labor. We weren’t yet able to assign a value – in monetary terms – to what these workers were doing; we weren’t even able to draw distinctions between what they were contributing. We couldn’t see the talent for the crowd. Now, though, the amateurs are being sorted according to their individual skills, calculations as to the monetary value of those skills are starting to be made, and a market appears to be taking shape. As buyers and sellers come into this market, we’ll see whether large-scale social media can in fact survive outside the price system, or whether it’s fated to be subsumed into professional media.

The ideology of 2.0 is supposed to be about ceding control — and MySpace, YouTube, Google, etc. are all for that — as long as they still control the profits.

I think most 2.0 users are smarter than that — and 2.0 companies that don’t share the wealth will find themselves in control of empty platforms and applications.

UPDATE

More news today of MySpace hostility towards users.

From Tiara.org:

“MySpace now transparently adds ‘allowNetworking=”internal”‘ to all Flash Player instanced placed in its pages, effectively disabling any buttons which link anywhere.”

So: stuff like Slide.com, RockYou.com, and YouTube’s Flash video wrappers will no longer be able to link back to the sites if the user is using Flash 9. Generally adoption for Flash isn’t that quick — but since all users with Flash 8 currently have broken MySpace video/audio players, you can expect that to have somewhat of an effect on the adoption rate (i.e.: skyrocket).

MySpace can say all they want about wanting to protect users, but really this is about them protecting their advertising dollars. The barnacle-like secondary market sites will have to find increasingly creative techniques to launch Flash-based content within the site if they want it to spread virally.

From TechCrunch:

That’s a major blow against the viral spread of services like YouTube, RockYou and countless emerging others. I’ve been talking to a lot of widget vendors lately, and “it works in MySpace” is a now a primary selling point. Companies are investing large amounts of money in widgetizing content from one site onto another and MySpace is huge. This move, in the name of security, will likely do serious damage to the cottage industry of flash widgets in MySpace. In as much as users love their widgets, that means this will do serious damage to MySpace as well.

The tension between Web 2.0 “openness” and the need to control corporate profits is likely to accelerate and, sooner than many players expect, will start to separate winners from losers.

Tweet This Post  Share on Facebook

Robert Young has an interesting post on GigaOm which got me thinking about this — Robert argues that traditional media companies should focus on building “socially-integrated media empires,” with News Corp’s acquisition of MySpace being the touchstone example:

At the end of the day, the media conglomerates should view social media much like they did the rise of cable TV. Cable eventually took half the market away from traditional broadcast TV, so the media conglomerates vertically and horizontally integrated their way into cable in order to buy back market share. They should do the same with social media by pursuing a strategy of social integration. Rupert Murdoch already made his first move, and it looks like NBC is about to take their first baby steps. Welcome to the new world of socially-integrated media empires!

As I said to Robert in a back-and-forth in the comments of his post, the notion of a socially-integrated media company assumes that media companies can “own” social media in the old media sense.

As I’ve argued before, the reason why News Corp is struggling to monetize MySpace is that most people who visit MySpace are not visiting “MySpace,” the News Corp media property — they are visiting EACH OTHER.

Contrast what News Corp is trying to do by directly monetizing the content it “owns” on MySpace (with the issue of ownership leading to incidents like the Billy Bragg brouhaha) with what Google did with AdSense.

AdSense has been so successful because it does not attempt to own either the content platform or the content itself — note that Google does not run ads on Blogger per se — they provide bloggers with a distributed, self-serve, revenue-sharing ad platform to run the ads themselves, and then Google takes a (big) piece of the action. But they don’t have to own Blogger to do it — owning Blogger simply allows Google to provide the blogging platform for free and thus drive more content creation that feeds AdSense.

News Corp needs to stop thinking in terms of “owning” MySpace’s page views — advertisers don’t want to advertise on those pages because News Corp doesn’t control the content. And MySpace users don’t want the ads appearing on “their” pages uninvited.

It would seem the real opportunity is for someone, News Corp or a third party, to offer MySpace users a platform like AdSense to monetize their content. In this scenario, MySpace is merely a free host, like Blogger — it gives them no advantage in providing this distributed ad platform.

As Robert pointed out in response to this idea:

Currently, if users place those ads on their pages, they would be in technical violation of MySpace’s TOS. It would be very interesting to see how they deal with such a situation.

News Corp could simply buy the new ad network, of course. But that wouldn’t really resolve the core issue.

It would indeed be very interesting to see what would happen. There is a BIG opportunity to monetize MySpace and social media — just not in the old 1.0 way.

Tweet This Post  Share on Facebook

No word yet on whether revenue growth has matched traffic growth. I’m on the edge of my seat to see the next News Corp quarterly earnings report. If the revenue curve matches the traffic curve, I’ll be the first to agree with Jeff Clavier and the many others who have declared News Corp’s acquisition of MySpace for $580M a “bargain.”

Tweet This Post  Share on Facebook

So why hasn’t Google launched anything as successful as the original search? Because it’s a pretty darn tough act to follow. Google search was life changing for everyone on the web, but life-changing applications don’t come along that often.

You can see this when comparing Google’s reach to other popular web apps, like MySpace, YouTube, Digg, and Flickr.

On any given day, more than 25% of people on the web use Google. (Yes, Alexa is imprecise, but gut check says this is directional correct.)

Even the much heralded (and hyped) MySpace and YouTube have only a fraction of the reach. MySpace does compete with Google on page views, but that’s from a lot a MySpace power users.

Google search is in a class by itself. Is it any wonder that Google has not been able to reproduce this kind of dizzying success?

I wonder if Google is like one of those musicians whose first album is such a runaway success that they are never able to outdo themselves — think Alanis Morissette.

Don Dodge wonder whether Google is a “one trick pony.” Perhaps a more apt phrase is “one hit wonder.”

What’s most sobering about the chart above is how much distance separates Google search from all of the other web apps chasing the same blockerbuster success.

I’ll end with my favorite refrain — the key to Google-like success is making apps that are life-changing for AVERAGE PEOPLE — even for Google.

Tweet This Post  Share on Facebook

To publicize the contest, Disney built its own “page” on MySpace and bought an ad on MySpace’s front page. But it steered clear of the profile pages created by MySpace’s nearly 85 million users — the popular but controversial part of the site where users post links to friends’ pages, list their likes and dislikes and display photos, sometimes including scenes of underage drinking and sexually suggestive material.

“We would never be on a personal profile,” says Jack Pan, vice president of marketing at Disney’s Buena Vista Pictures. “We want to be in the official areas.”

MySpace is already admitting that this is part of their utterly 1.0 strategy to turn themselves into a portal:

To draw in advertisers, MySpace has quietly begun building an array of new sections, highlighted on the front page, that deal with subjects ranging from books and movies to games, comedy and horoscopes. The areas, which contain articles written by editors and links to related blogs and groups elsewhere on MySpace, are meant to be “safe” for advertisers that want to appear on the site but don’t want to be associated with unsavory material.

The new sections are also part of a larger News Corp. effort to turn MySpace into a full-fledged portal that can compete with Yahoo Inc. Although News Corp. has been careful not to micromanage the wildly successful site, it has been quietly beefing up its features — adding, for example, video downloads and instant messaging — to make it look more like a regular portal.

So much for the 2.0 glories of social networking! This is such a sham, and users will see right through it.

Still, it isn’t clear how much attention MySpace users will pay to these advertiser-friendly areas. Many users spend most of their time on their own pages and those of their friends.

This lays bare the emptiness of all the MySpace hype. For USERS, who are the ones who matter in the business equation, it’s all about THEIR content. They don’t really care about wall garden content. That’s not why they use MySpace!

I love this phrase from the article: “the profile pages created by MySpace’s nearly 85 million users — the popular but controversial part of the site” — hello! That profile pages ARE the site! People don’t got to MySpace to see MySpace. They go to MySpace to see each other.

Maybe that’s why Disney’s Pirates of the Caribbean page only has 70,864 friends out of 85 million users.

Is there value to this exposure on MySpace? Sure. But the walled garden approach is just one more factor that is sucking the cool out of MySpace.

Speaking of which, ValleyWag has a great send-up of MySpace’s new security measures. My favorites:

# The annoying “punch the monkey” ads will now double as thumbprint-scan ID checks.
# Every user under 18 can still say they’re 20, and every user over 18 can still say they’re 14.

I’ll bet you the first thing that the folks who run MySpace do every morning when they wake up is check the traffic, hands trembling. As long as the traffic stays up, the house of cards will hang together. But as soon as there’s a sustained downward trend in the traffic, the whole thing will start to unwind.

(I know I can’t conclude anything from this Alexa graph, but it’s still fun to look at.)

Tweet This Post  Share on Facebook

A 14-year-old Travis County girl who said she was sexually assaulted by a Buda man she met on MySpace.com sued the popular social networking site Monday for $30 million, claiming that it fails to protect minors from adult sexual predators.

The lawsuit claims that the Web site does not require users to verify their age and calls the security measures aimed at preventing strangers from contacting users younger than 16 “utterly ineffective.”

“MySpace is more concerned about making money than protecting children online,” said Adam Loewy, who is representing the girl and her mother in the lawsuit against MySpace, parent company News Corp. and Pete Solis, the 19-year-old accused of sexually assaulting the girl.

Loewy said the lawsuit is the first of its kind in the nation against MySpace.

Solis contacted the girl through her MySpace Web site in April, telling her that he was a high school senior who played on the football team, according to the lawsuit.

In May, after a series of e-mails and phone calls, he picked her up at school, took her out to eat and to a movie, then drove her to an apartment complex parking lot in South Austin, where he sexually assaulted her, police said. He was arrested May 19.

The lawsuit includes news reports of other assault cases in which girls were contacted through MySpace. They include a 22-year-old Wisconsin man charged with six counts of sexually assaulting a 14-year-old girl and a 27-year-old Connecticut man accused of sexually assaulting a 13-year-old girl.

Call it a frivolous lawsuit by a greedy, publicity-hungry lawyer. Call it the over-reaction of a distraught parent in search of someone to blame. Call it a shameless publicity stunt. Call it whatever you like.

But this kind of bad of PR is going to make advertisers run for the hills and make MySpace users think about checking out the proliferation of alternative social network sites popping up all over the place.

Tweet This Post  Share on Facebook

The same is true of the related memetracker category, with Gabe Rivera now running four vertical versions of the original Memeorandum.

Ditto for social networking sites — for example, MySpace’s books, comedy, games, and movies verticals:

Like Netscape, these verticals within MySpace have no distinct branding. (How long do you think it took them to come up with MySpace Comedy?)

On Netscape, community topic interests are just a bunch of undifferentiated “channels” (a very 1.0 term, but then it is AOL).

On the flip side, you have companies launching verticals dedicated to serving one community, such as Marktd, the Digg-like PSFK spin-off that focuses on the marketing community, and Boompa, the social networking site for car enthusiasts.

Gabe’s memetracker sites seem to bridge the divide because they are separately branded with dedicated URLs — after he decided to spin off more verticals, Gabe clearly made an effort to more distinctly brand the gossip and baseball sites. Boompa is example of the purest form of vertical — they do cars and nothing but cars.

Which brings us to the key strategy question — which is better, the branded niche approach or the uni-branded vertical approach?

Interesting, when TechCrunch wrote about Boompa, a commenter raised the issue of whether a general car site was niche enough:

Boompa is competing against thousands of generalist and niche oriented auto communities that already have established brands, huge user bases, and equal if not superior feature sets. Automotive enthusiasts choose communities about their specific vehicles – that is why communities like benzworld.org and m5board.com (which I frequent) are so much more popular than general communities like autoforums.com. If you are going to go after a larger landscape than just one manufacturer, than you should target a specific demographic and create a community around it like tunerfriends.com – boompa is just too generalist and too late to market.

To which Boompa founder Dave Snider responded:

You could be right, though traditionally umbrella sites do tend to handle more traffic then boards for no other reason then google (more content usually equates to more traffic). Cardomain, who I consider the site most similar to ours, is easily the largest non-classified car site on the net at present. Also, we are as far as I know the only car site that has a specific board per car model, so we do at least try to give people a narrow experience if they want it. Add that with a part specific database (who is using such and such part), user submitted guides (though we don’t have many at present) and there’s a potentially large amount of content to be built over time. Again… potentially, which isn’t saying much.

I believe you’re correct about relevance though. Are we going to be as relevant for VW fans as VWVortex? Definitely not. I think we’d be successful simply if people put their sigs linking to their car at boompa at those sites.

One could argue that the uni-branded vertical approach allows for cross-selling opportunities, but I’m betting that the niche approach will ultimately prevail. There is something very mass media 1.0 about the Netscape/MySpace approach of trying to be all things to all people.

But then again, that’s exactly what Yahoo did.

It remains to be seen how truly different Media 2.0 is from Media 1.0 — will it be level competition among thinly sliced niches or the same old consolidation and conglomeration?

Tweet This Post  Share on Facebook

WB is certainly capitalizing on MySpace’s prime homepage real estate, with an appropriately participatory marketing program that invites fans to upload their own superman pictures. And fans have indeed uploaded some fun pictures and made “friends” with Superman. (Although 25,000 out of 75 million users doesn’t seem like a high penetration for participatory involvement with the ad campaign.)

What’s interesting is what you find when you click past the cherry picked pictures on the main Superman page to see all of Superman’s friends, where, of course, you see MySpace denizens in all of their unwashed — and in many cases scantily clad — glory (including the ubiquitous “Tom”).

When you give your brand over to a community that controls its own images, this is what you get.

It will be interesting to see whether companies like Time Warner think this is a positive aspect of what they paid for.

It would also be interesting to compare the results of the MySpace marketing effort with the Superman TV channel on AOL Television, which could prove to be an actual example of the fabled but never really seen AOL Time Warner synergy.

To put it more plainly, this is user-generated content vs. “professionally produced” content.

Which would you rather pay for?

Tweet This Post  Share on Facebook

How long will it take for News Corp to turn MySpace into a business as wildly profitable as it is widely used?

As with Web 1.0, the principal business strategy for Web 2.0 is to drive utilization and then figure out how to make money off of it.

Hey, it worked for Google — that means it will work for everyone else, right?

MySpace is the ultimate test of this strategy — and they don’t have an infinite amount of time to figure it out.

Tweet This Post  Share on Facebook

LostCherry is an aspiring MySpace killer that is taking direct aim at many of MySpace’s most conspicuous vulnerabilities. They even have a top 5 list:

What’s really interesting about LostCherry is not that they’re taking potshots at MySpace but that they have focused on MySpace’s shortcomings as an opportunity to innovate with new features and new platforms for socializing:

Upload 100 PHOTOS into your own albums – even directly from your cell phone!

Instantly preview any member by hovering over their photo.

Instant alerts on your homepage when a friend uploads a photo or leaves you a comment.

Use the Shoutboxâ„¢ on your homepage and instantly private message anyone on LostCherry.

Trust System…No Big Brother here to delete profiles or photos. The community regulates what it sees.

LostCherry has a point system that encourages usage and also provides the basis for some ecommerce revenue opportunities in the works:

What are Cherry Points?
You earn points while you surf and use LostCherry. When you reach a certain level, you will unlock features and benefits such as increased photo storage, highlighted nickname, etc. You can see your point total on your home page or profile page. Cherry Points also help your Cherry Ranking.

Points are awarded when you:

* Rate a photo
* Leave a photo comment
* Upload a photo
* Leave a comment
* Change your trackz
* Rate a member’s profile
* Upload a mobile photo
* Someone becomes your fan
* Someone adds you as a friend
* Take someone’s cherry comment
* Configure your mobile phone
* Configure your trackz
* Successfully invite someone to join LostCherry (500 points each!!!)

What are Cherry Bucks?
As you earn Cherry Points, you will also earn Cherry Bucks. You can use these Cherry Bucks to buy virtual gifts for anyone on LostCherry! Use them to either flirt, cheer someone up, or just for fun! You will find the LostCherry Gift Shop link on a member’s profile page in the top left section.

LostCherry members can earn their way up through a hierarchy of Account/Member levels that range from “Freshmeat” to “Cherry Idol,” which drives utilization through ego stroking.

Based on what I heard from Dave Yoo of Lost Cherry, they are focused on non-advertising revenue models, a refreshing change from the pedestrian focus on advertising that has emanated from the MySpace camp (and most of Web 2.0 for that matter):

The conventional “get more page views for ad revenue” model is not something we are relying on. Our main focus is to follow the eBay model and be the best at facilitating user-to-user & user-to-community interactions. We believe that we accomplish this, and the revenue streams will present themselves naturally. As one example, we currently have a “Cherry Blast” feature that members can use to reach the entire user base for $5 to $15 depending on duration that is showing quite a bit of traction. We don’t allow Blasts for commercial purposes, but only for members.

Lost Cherry is also looking to innovate on the content control front by enabling the community to police itself (certainly a more 2.0 approach than MySpace’s 100+ on-staff site police):

1. Our site makes it very clear when someone is a “veteran” and subsequently a trusted member of LostCherry. We do this by bolding and changing the color of their nickname (you might’ve seen the different colors on our ticking online user bar) as well as calling out their level on their profile page…again not unlike the seller/buyer rating system on eBay. Interestingly enough, these members have taken upon themselves the role of keeping LostCherry a safe place and almost “bully” out people who harass or act inappropriately. Yes, this may possibly restrict growth, but we feel it’s for the right reason.

2. Due to the immediate risk of adult content being uploaded, the team has designated 6 members (and more as needed) with whom we have gone to great lengths to develop a strong relationship to help regulate this content. We call them LostCherry “Bouncers” instead of Moderators to keep our edgy motif. We provide some basic guidelines as well as multiple ways to contact us for any gray area issues. All in all, we feel we have a constantly evolving policing methodology in place that has and will scale as we grow.

Given that they are not depending on the good grace of advertisers, they don’t have the same concerns as MySpace does over how content appears to big brands.

It’s notable that LostCherry is also addressing privacy concerns with their approach to online conversation:

What is my Shoutboxâ„¢?
Your Shoutboxâ„¢ is your private chat area — only you can read the messages inside your Shoutboxâ„¢. With this feature you can instantly chat with anyone on LostCherry. You can send someone a shout in three ways:

1) Click on the shoutbox links throughout LostCherry (i.e. on a member profile in the upper left hand side, on a bulletin, etc.) or
2) Click on the users name when it appears in your shoutbox.
3) Use the ‘IM:’ field inside the window that pops up when you preview a profile.

Can anyone read my Shoutboxâ„¢?
No — only you can read the messages inside your Shoutboxâ„¢.

LostCherry only has 49,000 members, just a drop in MySpace’s 80 million user bucket — but then it wasn’t too long ago that MySpace had only 49,000 users. The pace of viral adoption is truly astonishing.

And with a name like LostCherry, they certainly compete with MySpace on edginess.

It will be interesting to see whether LostCherry can capitalize on the fickle teen’s quest for what’s new and hip.

UPDATE

Based on comments on this post and many more at Digg, LostCherry has some passionate users. There is also evidence in these comments that MySpace is gaining a reputation among (former) users as a place for young teens, pedophiles, and the police.

UPDATE #2

This post was unceremoniously “buried” at Digg — read more about it.

Tweet This Post  Share on Facebook

Many companies that recruit on college campuses have been using search engines like Google and Yahoo to conduct background checks on seniors looking for their first job. But now, college career counselors and other experts say, some recruiters are looking up applicants on social networking sites like Facebook, MySpace, Xanga and Friendster, where college students often post risqué or teasing photographs and provocative comments about drinking, recreational drug use and sexual exploits in what some mistakenly believe is relative privacy.

Young people may be naive but they are not stupid.

The generation just hitting puberty will watch the class ahead of them get screwed out of college admissions and job offers as a result of too much online social networking.

And they won’t make the same mistake.

Tweet This Post  Share on Facebook

“I AM continually shocked and appalled at the details people voluntarily post online about themselves.” So says Jon Callas, chief security officer at PGP, a Silicon Valley-based maker of encryption software. He is far from alone in noticing that fast-growing social networking websites such as MySpace and Friendster are a snoop’s dream.

New Scientist has discovered that Pentagon’s National Security Agency, which specialises in eavesdropping and code-breaking, is funding research into the mass harvesting of the information that people post about themselves on social networks. And it could harness advances in internet technology – specifically the forthcoming “semantic web” championed by the web standards organisation W3C – to combine data from social networking websites with details such as banking, retail and property records, allowing the NSA to build extensive, all-embracing personal profiles of individuals.

Looks like News Corp isn’t the only one to see the data mining potential.

There is a privacy backlash coming that is going to throw cold water on MySpace, Web 2.0, and all the related frothing over anything with the word “social.”

In any case, it turns out only 16% of web users have drunk the “social media” Koolaid:

Nielsen has identified a group, which it dubbed “My.internet,” that’s especially likely to visit networking sites. Sixteen percent of Web users belong to this group, which has a median age of 32 (that number might skew high, Gibs said, because Nielsen’s research doesn’t include anyone younger than 18). Nearly all members of this group–99 percent–visit blogs; 84 percent are members of an online community; 57 percent have their own blogs; and 22 percent use RSS feeds.

The thing about young web users is that they’re not stupid — young people will get wise to the liability of all this public activity online.

And for those young people who don’t wise up, their parents aren’t stupid:

Most parents love the Internet and want their children to use it. But a new survey finds that almost as many also fear the online world especially social networking sites such as MySpace and worry that their kids will get in trouble with people they meet.

The study, which was done online May 5-10 by Insight Research Group with a margin of error of +/- 4.4 percentage points, says 80% of parents are concerned about children meeting sexual predators online.

Tweet This Post  Share on Facebook

“The digital gold inside of MySpace wasn’t the number of users, but the information they’re providing, structured and unstructured data,” Levinsohn said–both demographic and psychographic data that Fox Interactive can use to suss out the brand preferences of young people on the Web.

Levinsohn said that the site isn’t intended to be like a portal, and that “it’s more about [users] presenting themselves to the world” by creatively expressing themselves through their MySpace profiles. “It’s important for us not to suppress that–not to push content,” he said.

So if I follow this latest contortion on the rationale for the $580-million-dollar purchase of MySpace, it’s all about data mining.

Which means that MySpace is officially the most expensive data mining project ever. For that price, they could have bough three market research companies. Or paid 1 million teenagers $500 to participate in focus groups.

But wait, what teenagers post on their MySpace pages is a “pure” reflection of their consumer habits, some will argue. Well, maybe, but I’d love to hear Levinsohn hold forth on exactly how they plan to data mine the chaotic slather of content on most MySpace pages.

It’s notable that the rationale for News Corp’s purchase of MySpace seems to be changing as often as the rationale for the Iraq war.

As for advertising on MySpace, which was supposed to be the big victory for News Corp:

More mainstream marketing on MySpace will be kept to the “well-lit” areas of the site, like the Books, Comedy, Film, and Games sections rather than on individual profile pages, which have less strict content controls–something many advertisers have expressed concerns about.

Sounds more like advertising will be roped off away from the action, like protesters at a Bush rally. And even if they could, most advertisers wouldn’t take the risk of appearing on individual pages anyway.

For the sake of their shareholders, I hope News Corp has a plan to turn all that MySpace “data” into dollars.

Tweet This Post  Share on Facebook

Bragg has deleted his tunes from his MySpace.com page, which offers this explanation: “SORRY THERE’S NO MUSIC,” because “once an artist posts up any content (including songs), it then belongs to My Space (AKA Rupert Murdoch) and they can do what they want with it, throughout the world without paying the artist.”

The troublesome fine print informs users that by posting any content, “you hereby grant to MySpace.com a non-exclusive, fully-paid and royalty-free, worldwide license (with the right to sublicense through unlimited levels of sublicensees) to use, copy, modify, adapt, translate, publicly perform, publicly display, store, reproduce, transmit, and distribute such Content on and through the Services.”

Ouch — News Corp is showing its 1.0 roots.

And of all the musicians to piss off.

I really do wish it was still the IPO days — when MySpace would have gone public — and we could now enjoy wtching the stock on its way down.

Tweet This Post  Share on Facebook

Hi everyone! So this is this my first blog and my mom is going to kill me. She told me that she doesn’t want be to be like those myspace kids. So in an effort to let her sleep at night there’s no crazy stuff on this blog that could potentially tarnish my inpeccable rep.

This an actual blog post from a student blogger in an intro to digital media course at a top-tier university (in which Publishing 2.0 is required reading, which is both neat and scary). I’m purposely not linking to this post because I don’t want to give this novice blogger a rude awaking to how open the web is — nor do I want to get her in trouble with her mom.

My point here, of course, is to take aim again at my de facto favorite target: MySpace. You have all the necessary ingredients here for the demise of a youth-driven phenomenon:

1. “My mom is going to kill me”
2. “Let [my mom] sleep at night”
3. “Tarnish my impeccable rep”
4. “Those myspace kids”

Following my recent publicity as a noted MySpace skeptic, I’ve been getting emails from lots of aspiring MySpace killer sites who smell blood in the water. More on that to come.

(Lesson to novice bloggers: Thanks to the miracle of web stats, all links are traceable back to the source. In the digital age, your required reading may write back.)

Tweet This Post  Share on Facebook

And then I thought: there’s quite a bit of irony in all this. Here I am with my one-man-band “user-generated content,” taking shots at the granddaddy of user-generated content, and suddenly the skeptical view of MySpace is being read by millions of people in the Times (ok, well maybe not that many).

(Incidentally, the notion of a blog as “user-generated content” is ridiculous on the face of it — what exactly am I a user OF? Wordpress? I’m not a user — if anything, I’m a publisher, like any other — except for the profit margins.)

What’s so appealing, then, about this skeptical view of MySpace? Dan is right that, despite the fun I had with Alexa graphs, the “evidence that MySpace is fading is, at best, dubious.”

I think this struck a nerve because instinctively everyone knows the MySpace phenomenon can’t last.

After all, MySpace is just a PLATFORM — the spaces on MySpace belong to the users — it’s YOUR space, not THEIR (i.e. News Corp’s) space. The users can pack up and leave any time they want — that’s what happens when you don’t own the content.

Remember, it’s about the COMMUNITY, not the platform — MySpace boosters tend to conflate the two. Communities are about people, and the places for people to connect online are proliferating like rabbits.

While we’re on the topic of the NYT article, what’s up with the online articles not including in-line links? Instead, they list all the links in a sidebar titled “Related.”

Perhaps the Time doesn’t want to temp readers with the opportunity to link off the site — or maybe they just like annoying people by flouting the convention used by every other website on the planet.

The print edition is even worse — here’s where the sidebar with list of URLs would actually make sense, but instead there’s just a tiny note at the bottom: “Complete list of links at nytimes.com/business”

Based on the large number of people who arrived here by Googling “Publishing 2.0 blog,” I’d say most print readers have better ways of finding the references that interest them.

Oh, and it’s worth noting that a reference in the New York Times doesn’t drive nearly as much traffic as a top spot on Techmeme.

Tweet This Post  Share on Facebook

Two panelists were MySpace users. The others expressed a certain backlash and purposeful resistance to the addiction of MySpace. One 14 year old used to be an active MySpace user but stopped after the police came to her school to warn the students about various dangers lurking there.

This points to two key MySpace vulnerabilities (among many):

1. When a fad becomes overhyped, teens will eventually retreat
2. Most teens know that MySpace isn’t entirely safe

After reading this, I went to check out MySpace’s latest Alexa chart:

Could it be that MySpace peaked in April? The traffic chart sure looks a dot com stock chart circa April 2000 — the run up always looks like it will never end…until it does.

Come to think of it, Facebook is looking kind of downish, too:

Well, anyway, just wondering.

UPDATE

David Krug and others think the MySpace dip is cyclical, driven by spring break, finals, etc. Well, hmmm. Most spring breaks fall in March or early April — so it appears that extra free time drove MySpace to its peak — and then what? Studiousness swept the land as people got an early jump on studying for finals in mid April? And wouldn’t there have been a similar seasonal downturn last year?

Yeah, seasonality, that’s go to be it. And that’s right, I have fallen out of touch with teenage psychology. I forgot how conformist teenagers are — of course they will continue to embrace MySpace now that’s gone totally mainstream. It’s totally hip to do what everyone else is doing.

Given David’s brilliant seasonal theory, I wonder when we should see the sharp upturn as everyone finds time to rush back to MySpace.

UPDATE #2

I’ve been told that I’m “so out of touch with this age group,” so I’m bringing in an outside expert (from “For Teens, MySpace.com Is Just So Last Year“) — “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.”

This is my favorite observation:

Teens like Larios are increasingly finding other social networks that meet their needs — and that aren’t as well known to their parents.

MySpace’s notoriety could be a turnoff for young people who are looking for an online community of their own

Parents know all about MySpace — yeah, that really makes it a long-term winner for teens.

UPDATE #3

Since I can’t respond to this Bloggers Blog post on their site, I’ll do so here. It looks like they got their apples and oranges confused — they posted the Alexa REACH chart for MySpace to counter my posting of the PAGE VIEW chart:

So the reach is flat and the page views have dropped.

Yeah, must be because kids are spending more time outside. I guess we’ll have to check back in December.

For the record, I have no interest in declaring MySpace “dead” — just deeply, deeply vulnerable.

Tweet This Post  Share on Facebook

And now there’s a new worry: a “phishing” scam that experts say could compromise teens’ — or their parents’ — financial information.

As with other phishing scams, in which con artists create realistic-looking Web sites using the names of well-known banks or other corporations, the MySpace scam tricks people into going to a copycat page and signing on. Once the user gets on the site, their computer can be infected with software that can later capture keystrokes typed while visiting legitimate banking or shopping sites, said Hiep Dang, director of threat research for Aluria Software, a division of EarthLink and a member of the Digital Knights fraud prevention group.

Other scams involve MySpace profiles that are completely fake and lead to links that can infect your computer, Dang said.

Tick…tick…tick…

Tweet This Post  Share on Facebook

It bears noting that MySpace is only a small part of the News Corp. empire, yet the company’s television, movie, and other media properties aren’t doing too shabbily, either. The other sectors may not have the sex appeal of MySpace, but they are generating gobs of cash — more than $2 billion so far this year — and that inflow is no doubt funding numerous initiatives that aim to meld the content platforms together.

This is from a summary of the Motley Fool article that appeared in a Media Post email newsletter:

To be sure, MySpace is still a tiny part of News Corp, though it represents most of the company’s opportunity for growth: it’s already generated $2 billion in cash this financial year, about four times what News Corp paid for it nearly a year ago [bold is mine]; it also averaged 30 billion page views in April, placing it second among all Web sites, according to Nielsen/NetRatings.

Now here’s News Corp’s consolidated income statement:

And here’s the only mention of MySpace in News Corp’s earnings release:
“

This quarter also saw accelerated progress in our new media evolution. MySpace expanded to over 70 million registered users, solidifying its prominence as one of the fastest growing sites on the Internet.

Note to MediaPost: OOPS! It’s actually the OLD MEDIA businesses thatare kicking off all that cash, NOT MySpace. And all News Corp currently has to show for its MySpace bet is users and page views, NOT operating income.

I wouldn’t normal go out of my way to embarrass a group like MediaPost, because I like their stuff, but this is so representative of the hype in the market. The way people talk about MySpace you’d think that it’s ALREADY generating $2 billion in operating income.

But it’s NOT. And the truth is that they have NOT figured it how to do it yet — which doesn’t mean they won’t. If they do, more power to them.

In the meantime, let’s be careful not to drink too much of that spiked Kool-Aid, lest we start to party like it’s 1999 again and see profits where there are only “eyeballs.”

Tweet This Post  Share on Facebook

Chernin is a big believer in user-generated content. News Corp.’s MySpace is thriving. But he does not believe that there’s a vast backlog of great unmade TV shows and movies that cannot connect with audiences because of bottlenecks in distribution. To the contrary, he and the other creative executives at Fox argue that the digital revolution will increase the value of high-quality, professional, branded content.

“If you don’t have incredibly dynamic, exciting, frankly great content, you are toast,” Chernin says. “In this world of infinite choice, mediocrity is finished.”

So MySpace, with its endlessly bland user-generated contentm is “thriving,” but the “digital revolution will increase the value of high-quality, professional, branded content.”

Hard to have that cake and eat it too, huh, Pete? Is the future of content “professional” or “user-generated”? Well, which is it?

Wait! Just got a call from Pete — he says it’s whatever News Corp investors need it to be. And he says that he’s got to be careful not to kill the goose:

It bears noting that MySpace is only a small part of the News Corp. empire, yet the company’s television, movie, and other media properties aren’t doing too shabbily, either. The other sectors may not have the sex appeal of MySpace, but they are generating gobs of cash — more than $2 billion so far this year — and that inflow is no doubt funding numerous initiatives that aim to meld the content platforms together.

Perhaps News Corp should think about paying of some MySpace’s 30 billion page views per month back to investors as a dividend — they could really take that to the bank!

I suppose “mediocrity” is in the eye of the beholder. For MySpace users, their friends are dishing up content that holds their attention more than that “professional” slop on TV (especially Fox).

How about this for a prediction: Media executive HYPE is finished.

Tweet This Post  Share on Facebook

If the digital generation is content to entertain themselves with amateur (i.e. user-generated) video on YouTube, why should there be a business around expensively produced video content? The economics of mass media advertising that supported the TV content production and distribution business have ceased to function, destroyed by technology that has reduced the cost of production and distribution to near zero, making the old economics untenable.

I’ll return to my favorite George Will quote:

In the late 1850s, American cotton was king, feeding the mills of England, but on a tonnage basis, America’s second largest export was…ice. Blocks of it were sawed from New England’s ponds and shipped, insulated under sawdust, to warm climes as distant as Calcutta. People probably thought that would go on forever. Nothing does.

TV studios and networks assumed that their business would last forever. But nothing does.

The real question is not who will pay for TV — it’s whether anyone will pay for the creation of any content?

What if dollars have no place in the new economics of content?

In a WSJ cyber-dialogue with Vint Cerg, Esther Dyson was channeling Michael Goldhaber and managed to crystalize for me (finally) the key insight of media 2.0:

…attention has its own intrinsic value, independent of money. People go on the Web in search of attention; they don’t want to give it as much as get it.

This is a blazing, head-spinning insight.

In media 1.0, brands paid for the attention that media companies gathered by offering people news and entertainment (e.g. TV) in exchange for their attention. In media 2.0, people are more likely to give their attention in exchange for OTHER PEOPLE’S ATTENTION.

This is why MySpace can’t effectively monetize its 70 million users through advertising — people use MySpace not to GIVE their attention to something that is entertaining or informative (which could thus be sold to advertisers) but rather to GET attention from other users. Why is it so appealing to MySpace users to be able to post messages publicly on other users’ sites? Because they can GET attention as a function of GIVING it.

This make perfect sense in a world of participatory media — the value flow has reversed itself. MySpace can’t sell attention to advertisers because the site itself HAS NONE. Nobody pays attention to MySpace — users pay attention to each other, and compete for each other’s attention — it’s as if the site itself doesn’t exist.

You see the same phenomenon in blogging — blogging is not a business in the traditional sense because most people do it for the attention, not because they believe there’s any financial reward.

What if the economics of media in the 21st century begin to look like the economics of poetry in the 20th century? — Lot’s of people do it for their own personal gratification, but nobody makes any money from it.

Tweet This Post  Share on Facebook

“Ad-supported software services are an integral part of Microsoft’s plans to give consumers access to a broader variety of digital media, whenever they want and on whatever device they prefer,” said Ballmer. “Our close partnership with the ad community is extremely important to us as we evolve Microsoft from a software company into the world’s largest, most attractive provider of online media through MSN, Windows Live(TM) and adCenter.”

This is the real “convergence” — the technology industry and the media industry have now merged. EVERYTHING IS MEDIA — software applications, electronic devices, Hollywood content, publishing content, user-generated content, etc.

And despite the success of eBay and iTunes and a few companies still pursuing paid services/content (e.g. Flickr), the focus of the new “industry” is overwhelmingly on one business model: ADVERTISING.

Microsoft’s growth strategy: ADVERTISING
Google’s growth strategy: ADVERTISING
Yahoo’s growth strategy: ADVERTISING
MySpace’s growth srategy: ADVERTISING
Nearly every Web 2.0 startup’s growth strategy: ADVERTISING
Network and Cable TV’s growth strategy: (online) ADVERTISING

The problem arises when you look at the amount that brands have spent on paid media advertising for the following marketing initiatives:

Burger King’s Subservient Chicken
BMW’s The Hire Film Series
Land Rover’s Go Beyond Channel
CA Milk Processors Cow Abduction
Wendy’s Square MySpace proifle
Nip/Tuck’s The Carver MySpace profile

You can see the pattern emerging. The network effect turns everything into a media platform, while at the same time obviating the need for media as a marketing vehicle because brands can use the network itself as a marketing vehicle.

So, you have the new media/technology industry orienting its collective business model toward advertising…at the precise moment when the paid media advertising pie may be on the verge of shrinking.

A recipe for disaster if ever I heard one.

Tweet This Post  Share on Facebook

From “MySpace faces call to crackdown on predators“:

Massachusetts on Tuesday called on popular teen social networking Web site MySpace.com to strengthen protection of children against sexual predators, including raising the minimum age for users to 18 from 14.

The arrest on Tuesday of a 27-year-old man in Connecticut on charges of illegal sexual contact with a 13-year-old girl he met through MySpace underlines the risks of the fast-growing Internet site that boasts about 60 million members.

“MySpace has not taken sufficient steps to ensure that the MySpace Web site is a safe place for minors,” Massachusetts Attorney General Tom Reilly said in a letter to MySpace.

He said a three-month investigation found that potential child predators were surfing MySpace seeking chats with potential victims and violent images or content were being posted to bully children.

Sure, it’s just this “banal” space, with hazards akin to riding a bicycle.

I guess we all believe what we need to believe.

But in the meantime, the Attorneys General continue to circle…tick, tick, tick

Tweet This Post  Share on Facebook

As consumers spend more and more of their media time online, ad dollars have been pouring into online media — the assumption has been that the billions of dollars that large companies spend on mass media advertising and marketing (i.e. TV ads) will ultimately follow the small company dollars online. If this assumption is correct, websites with the greatest command of online consumer attention, e.g. MySpace, will be the beneficiaries of this 1-to-1 transfer of marketing and advertising dollars to digital media.

But what if there’s a fatal flaw in this assumption? What if the transfer of marketing and advertising dollars online is not 1-to-1? What if the Internet has fundamentally lowered the marketing and advertising costs for big companies as it has for small companies? What if large companies can achieve the same sales objectives for a fraction of the cost of traditional mass media advertising?

All marketers know intuitively that mass media advertising is wildly inefficient — there’s the obsessively repeated Wanamaker quote about knowing that half of all advertising is wasted but not knowing which half. But the Internet may be doing more than make advertising more efficient and measureable, i.e. reducing wasted dollars — it may be fundamentally lowering its unit costs.

Let’s take my favorite example — MySpace. There’s an article in the Times today about MySpace’s struggle to monetize it’s ever-ballooning asset. According to comScore Media Metrix, MySpace had 28 billion page views in March 2006. Annualized, that’s 366 billion page views. Yet Richard Greenfield of Pali Capital estimates that MySpace’s revenue this year will only be $200 million.

Do the math — that’s a CPM of $0.06 $0.55!

Now consider one of MySpace’s key strategies for monetizing its vast network:

To expand ad sales, especially to big brands, Mr. Levinsohn plans to supplement the MySpace staff with a second sales force linked to the Fox TV sales department. He wants to expand one of Mr. DeWolfe’s advertising ideas — turning advertisers into members of the MySpace community, with their own profiles, like the teenagers’ — so that the young people who often spend hours each day on MySpace can become “friends” with movies, cellphone companies and even deodorants. Young people can link to the profiles set up for these goods and services, as they would to real friends, and these commercial “friends” can even send them messages — ads, really, but of a whole new kind.

Rumor has it that MySpace is currently charging $35,000 for these “advertising spaces” — from a comment by Pete Cashmore on one of my previous MySpace posts:

Well, MySpace was successful because it *refrained* from interfering with the community – heavy-handedness may actually harm it. But I agree with you that the monetization methods are totally unoriginal and very much a 1.0 approach. They’re trying to charge companies $35,000 to set up a profile, but there’s nothing to stop you doing that for free. However, I think there may be profitable ways to leverage the community itself (ie. not banner ads).

But what happens if big company brands realize that they no longer need a media middleman to connect with consumers? Why, for example, does a brand need to set up a page on MySpace in order for MySpace users to link to that brand’s online presence? If a brand succeeds in creating compelling and entertaining content that speaks directly to consumers and creates immediate value for them, why not just set that up “for free” on their own site and use the viral power of social networks to spread the word?

As Pete said, “there may be profitable ways to leverage the community itself” — but what if those profits go directly to brands and not to the owners of the network where the community exists?

Even for Google, the implications are great — big brands my spend more on search marketing than small companies, but that delta may be far less than in the world of traditional media, where big brands spent billions and many small companies couldn’t afford access to mass media advertising.

Now, I’m not suggesting that there’s no money to be made in 2.0 — I’m speculating that for media companies, it’s a whole lot less than what they enjoyed with 1.0.

I’m speculating that in a 2.0 future, total spending on marketing and advertising will shrink as marketing 2.0 proves to be far more cost efficient than marketing 1.0 — and big advertisers start pocketing that half of their advertising costs that were previously wasted.

UPDATE:

Umair takes issue with my MySpace example:

Now, the MySpace example is also flawed. Scott is using CPM to value MySpace. MySpace’s success is predicated on shifting the industry away from the flawed assumptions and logic of CPM, much like Google has done. MySpace’s challenge is to do the same thing for branding – to create a hyperefficient form of interaction, much like it’s already done with sponsored profiles.

CPM will continue to be the principal metric so long as everyone is focused on measuring the scale of MySpace in 1.0 terms — virtually every mention of MySpace comes with an obligatory reference to the total number of MySpace users and the total number of MySpace page views, along with a comparison to Yahoo’s scale.

But in 2.0 terms, the value of MySpace is in the network effect, i.e. the interaction among users and their ability to propogate information, including brand messages. But it’s very 1.0 to assume that the owner of the network platform is in the position to monetize this value — brands may discover that they don’t need to pay MySpace a dime to leverage the network of MySpace users.

A few other items worth noting:

1. Business 2.0 has a link to this post under the headline “MySpace haters unload on the Web” — why is it that skepticism is always equated with fear and loathing?

2. An Economist article on new media cites Lauren Rich Fine, a financial analyst for newspapers, who estimates that “for every advertising dollar that a newspaper gets for a print reader, it receives only 20-30 cents for his online equivalent.”

3. A perfect example of a brand cutting out the media middleman is Land Rover’s new broadband TV channel Go Beyond — if this effort is successful, the dollars flowing from Land Rover to media companies will likely diminish significantly over time.

Tweet This Post  Share on Facebook

Tweet This Post  Share on Facebook

Wired News ran the names of randomly selected registered sex offenders in San Francisco and neighboring Sonoma County through MySpace’s user search engine, and turned up no fewer than five men whose self-reported names, photographs, ages, astrological signs, locations and (in two instances) heights matched those of profiles on the state’s online sex offender registry.

and

Assuming the profiles are authentic, the easily verified presence of registered sex offenders in the online community highlights the difficulties MySpace faces as it seeks to clean up its content and public image, while maintaining the flexibility and privacy that has drawn more than 70 million users to its website.

AND

Already, one-third of MySpace’s rapidly growing staff of 300 is dedicated to customer service and support, looking into images and profiles that potentially violate the site’s terms of use. But with an astonishing 270,000 new users registering every day, and a thorny tangle of privacy and legal issues to navigate, MySpace doesn’t aspire to keep tabs on everybody.

At the same time, when your company continuously pops up in the news because your service is allegedly being used by sexual predators to exploit teens, having registered sex offenders posting openly on your site just looks bad.

“Just looks bad.” Indeed.

MySpace my have the greatest audience in the history of the Internet, but it also has the liability to match.

It’s the human carnival in all its ugliness — brought to you by Ovaltine.

Tweet This Post  Share on Facebook

Most ad networks say they review the sites in their network regularly to check for inappropriate content. But David Herpers, chief marketing officer for Amerisave Mortgage Corp. says he bought an ad that appeared on MySpace from a network that promised to run them on “loans and money and finance” sites. Yet in the past month, Amerisave learned that its ad was adjacent to a photo of the male anatomy on a page on MySpace. “It’s really alarming….I had no idea that this could conceivably happen,” Mr. Herpers says.

Oh, the naivety all around. Here’s another priceless example:

Glitches have occurred for mundane reasons. The Christian Children’s Fund bought ads on the largest online ad network, Advertising.com, which is owned by AOL, and specified that the ads not appear near any provocative content. But Advertising.com says it mistakenly turned off its content filters for an unspecified period of time last month, and the Christian Children’s Fund ad ended up next to an article about a sexual position in the sex section of About.com, which is owned by New York Times Co. The Disney ads were also placed by Advertising.com on About.com’s sex section during that time.

The best part is that News Corp (finally looking out for it’s shareholders), is taking a giant step back from all the messiness of user-generated content and Web 2.0:

MySpace, which is owned by News Corp., says that the personal Web profiles by its more than 50 million members can be racy. But it’s building new sections of the site for movies and music. “You’ll see us roll out more and more traditional controlled content of the kind that advertisers expect,” says Ross Levinsohn, president of Fox Interactive Media, which oversees MySpace.

So it’s all about CONTROL — hmm, where have I heard that before?

Let me be clear — I’m NOT saying that advertisers should not or will not ultimately cede control (although when they do, they need to be careful with products that people hate). I’m saying that until they do, it’s going to be a huge barrier to Web 2.0 profits.

Tweet This Post  Share on Facebook

Listen to Bill get the name of the site wrong in the opening. Here are some other quotes:

“Nobody really knows how old these kids are because they can’t check the IDs.”

“The problem is that these dopey kids get on there and give out all kinds of personal information about themselves.”

“What if the adult says, I’m 17, my name is Ricky, I’m buff, how is the kid going to know?”

A gift from the irony gods.

Tweet This Post  Share on Facebook

MySpace.com, the fast-growing community website hugely popular with American teens, has removed 200,000 “objectionable” profiles from its site as it steps up efforts to calm fears about the safety of the network for young users.

The site, which allows users to create their own profiles with details of their interests that can be viewed and linked to by other MySpace.com “friends”, was acquired by Rupert Murdoch’s News Corp last year and its phenomenal growth has placed it at the centre of the media company’s internet strategy.

Ross Levinsohn, head of News Corp’s internet division, said some of the material taken down contained “hate speech”. Some of it, he said, was “too risqué”.

“It’s a problem that’s endemic to the internet – not just MySpace,” Mr Levinsohn said. “The site, in the last two months, I think has become safer.”

Yeah, it’s an internet problem, but when you become one of the biggest sites on the internet, it becomes YOUR problem.

I liked the Media Post headline, which cuts right to the chase: MySpace Censors Content To Lure Marketers

I’m sure all the MySpace liberatarians will mourn the loss of freedom because hate speech and pornography pages were taken down, and yes this may put a damper on the community and the “network,” but in the end, the spaces on MySpace belong to News Corp, and News Corp belongs to its shareholders.

From spinmeister Chernin:

Also, advertisers have to feel confident their reputation will not be tainted by “inappropriate” content. Teachers and parents are concerned that, because information on MySpace is publicly available, it might put teenagers in contact with predatory adults. In terms of retaining its appeal, Mr Chernin said users had to keep feeling the site was theirs. “We don’t want to change the fundamental look and feel of the site,” he said. “We do not want users to have any sense that it is corporatised.”

Yeah, well, good luck.

Tweet This Post  Share on Facebook

In the meantime, MySpace is rushing to add more ad sales people. It had been selling its home page for about $100,000 a day. The price is moving up to about $750,000 a day, according to Chernin, who says he’s been told that Yahoo! commands about $1 million for its prime real estate.

So, $750K a day — that’s pretty pricey. I wonder who can afford that. To find out, I went to MySpace’s home page and found — NO ADS!

Hmmm. So I started surfing the pages that actually get traffic on MySpace — the pages of individual users, and here’s what I found:

House Ads

Google Ads

Dating Service Ads

Etc.

So WHO, exactly, is on the verge of paying $1 million dollars a day?

On my own undeveloped page, I actually did see some blue chip ads from Burger King, H&R Block, Citibank, Verizon, and others — but I can guarantee you that NO ONE is spending time on my page. But at least the content on my page is SAFE.

Speaking of which, I must say that I saw less of the usual porn and quasi-porn — it appears that MySpace is getting the message:

But if some of the criticism is overblown, Chernin has no choice but to take it seriously. Only if MySpace is seen as an advertiser-friendly site will News Corp. be able to realize its potential. [THAT SOUNDS AWFULLY FAMILIAR] The very tricky challenge for the media giant is to somehow manage MySpace, without taming its cool factor.

“We don’t want to change the cultural feel of MySpace,” Chernin says.

Of the company’s 280 employees, about a third work, at least in part, on online safety issues. They screen photos being submitted to the site and take down profiles of users who are found to be underage. About 220,000 profiles have been eliminated, according to a company spokesman. The company is also experimenting with software aimed at identifying pictures with a high proportion of bare skin, believe it or not.

“We need to be a leadership position about protecting minors on the Internet and, more importantly, giving the parents the tools they need to protect them,” Chernin says.

Bet those 280 employees are a real profit center.

Here’s the real problem: MySpace has the ultimate audience, but it’s taking an utterly 1.0 approach to monetizing that audience.

Some advertisers are being smart and taking their own 2.0 approach to MySpace, like the page Wendy’s created for it’s square burger — but creating a page on MySpace DOESN’T COST ANYTHING! That’s the beauty of user-generated media, isn’t it?

You would think that with an audience about to rival Yahoo’s, MySpace would be swimming in cash like Google, but they only seem to be swimming in hype.

Which leads me to this: What if the best marketing 2.0 strategies for leveraging the social media network are essentially free, and having the audience DOESN’T mean you can “monetize” it.

Maybe MySpace will ultimately figure it out, but heading towards the one year anniversary of News Corp’s acquisition, I’d think twice about spending $2 billion on FaceBook.

Tweet This Post  Share on Facebook

What’s most fascinating about Karp’s post, though, is not his reaction to MySpace but his reaction to his reaction to MySpace. Having offered a moral critique – a visceral one – he suddenly goes all wobbly.

Moral critiques are so uncool. They’re the surest way to lose your web cred.

Indeed. Much as I tried to shy away from the moral questions, they came after me with a vengeance — I became a foil for the anti-moralizer moralizers.

I hadn’t previously considered myself a “moralizer” — quite the opposite — I’m very wary of the term “morality” because its use as a political weapon has nearly emptied it of meaning — and issues of “your morality” vs “my morality” and how much morality is too much morality (or not enough) are pure quicksand.

Perhaps this reflects a lack of courage on my part. But reading some of the morally facile arguments and hypocritcally extreme perspectives that surfaced in response to my post has strengthened my conviction (and perhaps my courage — that remains to be seen).

I am bothered by those who see themselves on the left side of the issue who go into a panic and cry “fascism” in response to ANY discussion of morality. This is pure hypocrisy, because it is the same type of unconstructively extreme position that these critics claim to be railing against. My instinct is always to seek middle ground, but that is typically a losing proposition.

Believe it or not, I’m a born-and-bred Blue State liberal (I grew up in Queens, NY) — I’m typically pro-civil liberties, pro-1st amendment, etc. So if you’re having problems with my critique, well, this is flowers and sunshine compared to what you’ll get from redder corners of the country.

(You can see some of the “morality” debate in the comments on Nick’s post and in comments on the multiple posts that Chartreuse did.)

That all said, I’d like to get back to the issue of how morality impacts MySpace (and Web 2.0) as a BUSINESS, which is what I originally had in mind when I went off on the rant — Nick accused me of phoning in that business analysis, and maybe he’s right (although I’m sure he instinctively found the “morality” question more interesting). Nick passed along this CNET article, which pretty well validates my argument about the risks to MySpace’s business.

This is priceless:

Now playing: “Lovely girls from Chile show off their upskirt flavor in the school’s courtyard.” Sponsored by Apple Computer and AT&T.

Earlier this week, that was the actual pitch for a video that’s available on the “Girls Girls Girls” playlist at the popular iFilm Web site, complete with advertisements for the new MacBook Pro and AT&T’s broadband service.

Those weren’t the only companies sponsoring the video, which shows a parade of apparently high-school-age girls in skirts walking up to and over a shoe-top video camera. After clicking on the thumbnail image, a media player window pops up, displaying the video, which is labeled “mature” on the site. Next to the images is an ad for Comcast that blurts, “It’s Comcastic!”

Informed of the juxtaposition of the ads and the video, and other ad-and-video juxapositions of arguably dubious taste on a second Web site, AT&T said it was looking into the matter.

“AT&T has advertising policies to ensure our ads are placed in appropriate mediums consistent with the company’s brand,” AT&T said in a statement. “It appears the sites in question were part of a large buy vs. a specific target. To date, we’ve had no complaints or concerns. We are reviewing these sites, and if we determine that it is an inappropriate placement, we will discontinue advertising on those sites.”

Apple declined to comment.

So let’s walk through argument:

1. Big brand advertisers, e.g. AT&T, Apple, control A LOT of the ad dollars in play online — these dollars are essential to the de facto ad-driven business models of Web 2.0 companies, including MySpace and Google (pending any real innovation on the business model front).

2. Big brand advertisers are VERY protective of their brands:

“For Verizon corporate and the wireline business, I can report that our agencies must conform to very strict company guidelines about where any of our ads appear in any media,” Jim Smith, director of Verizon media relations, wrote in an e-mail. “When our online ad orders are placed, the insertion orders that we have with network partners are explicit as to prohibitions against appearing in the context of sexual, political or hate content.”

3. User-generated/Web 2.0 sites like MySpace that cannot guarantee a “safe” environment for these advertisers will NOT get these big brand ad dollars.

If anyone comments on this post, I can guarantee you that some responses will be centered on the theme of “this is nothing new” or “we’ve already dealt with this.” A few preemptive questions:

First, are AOL chatrooms (a frequent example) currently a thriving commercial propositions for Time Warner?

Second, isn’t the innovation of Web 2.0 that users are now creating and controlling content? Will Big Brands ever be willing to cede full control of brand management in a world of user-controlled media? (Not whether they SHOULD, but whether they WILL.)

Third, didn’t Google AdWords teach us that context matters A LOT? Will advertisers flock to MySpace just because they have the audience, REGARDLESS of the context?

Now, just a moment while I open up my Kevlar browser — okay, fire away.

Tweet This Post  Share on Facebook

I think the Web 2.0 (and MySpace) fan club is wearing a heavy set of blinders. We are only just beginning to understand the implications of this new technology. To say there’s nothing new or unknown about people’s use of it is DEEPLY NAIVE.

Have all the parents like Fred Wilson and Kathy Sierra, who think they are hip enough to “understand” what their kids do on MySpace, thought through the implications of the BW article? They may remember showing poor judgment as teenagers — that’s why we don’t let them drink or vote — but none of their coming-of-age mistakes has a permanent digital record.

This is the blindness of orthodoxy that the bandwagon causes, which is why no one saw the crash coming for Internet 1.0. (Some did see it coming, of course, but they were told they didn’t “get it” either.)

The supremacy of contextually relevant advertising is another example. Here’s the initial results from an eye tracking study by behavioral targeting ad agency TACODA:

In tests late last year, TACODA’s researchers recruited 30 human guinea pigs at malls in New Jersey and Southern California. They hooked them to an eye-scanning camera and recorded every darting movement as the subjects were shown 50 identical Web pages. The result: The ads placed on pages unrelated to the advertisements’ message actually attracted 17% more looks.

Or how about the related belief that search advertising will continue to grow forever (the following is from the same BW article):

But advertising executives predict that the display banners and videos that appear on Web pages will outpace search this year. “Most of the big money [advertisers] — cars, movies, packaged goods — are putting more of their budgets into display,” says Jeff Lanctot, general manager at agency Avenue A/Razorfish (AQNT ), the world’s largest buyer of Internet ads. “We think growth in search will fall back in ‘06.”

I remain committed to the position that it is better to be skeptical and question than to rationalize away — or worse — remain completely blind to the risks and the unknowns.

Tweet This Post  Share on Facebook

I’m not the first to raise a red flag:

Sex, Crimes, and MySpace
MySpace Isn’t for Advertisers, It’s for Sex
Scenes From the MySpace Backlash
Prosecutors: Men used MySpace.com to meet underage girls for sex

Try doing a Google News search for “MySpace murder” or “MySpace sex” and check out all the stories in reputable local media outlets (which have no obvious ax to grind with MySpace).

Still not disturbed? Try spending some time on MySpace. See how long it takes you to find sexually suggestive or explicit content.

Or, try going to the MySpace page of Reuters CEO Tom Glocer (which I found via I Want Media). Check out his friends, click around, and see what you make of what you find.

I’m going to be accused of fraternizing with Nick Carr for saying this, but this is what you get when you remove all social barriers — you get humanity in the raw.

Is this new to the web? Of course not. Is it limited to MySpace? Of course not. Does that mean we should start talking about censorship and regulation? I’m not going to touch that third rail — and I really don’t have any answers.

I’m not going to do a moral critique of MySpace or Web 2.0 or anything else — that’s not my gig.

I will say this — my greatest fear of MySpace is as a parent. That’s my personal view, which I won’t try to foist on to anyone else.

But as Web 2.0 watcher, I have a strong view from a business perspective, which leads me to this prediction: Rupert Murdoch will come to regret the purchase of MySpace.

Why? Because the reality is that MySpace can’t be controlled, and that’s a liability.

Yes, I know, Web 2.0 is all about “ceding control” to the “edge.” But MySpace pushes this evolution to the extreme.

Before you respond, let me be repeat — this is NOT a moral critique. It’s a practical, business critique.

“Social media” may be all the rage, but “society” functions best somewhere in between anarchy and fascism. Let it drift too far to one extreme, and things can get ugly.

And when things get ugly, it’s hard to sell advertising.

UPDATE

When you’re accused of being alarmist, you have to ask yourself whether everyone else knows something you don’t (i.e. criticism is valid) or whether you’re a cat wandering into a flock of complacent pigeons (i.e. criticism is not valid). In this case, I can’t claim to know which it is. I’ve heard a lot of passionate defenses of MySpace. But I’ve also heard a lot of fallacious arguments, like:

MY child doesn’t do anything bad on MySpace, therefore ALL children are safe on MySpace.

Children I know on MySpace are, as far as I can perceive, “stellar students, athletes, musicians and people,” and therefore there’s nothing to worry about.

Advertising on MySpace is growing, and will therefore continue to do so.

MySpace is virtual, and therefore the any potential danger is virtual.

Anyone who thinks there’s anything possibly wrong with MySpace must not “get it.”

There’s an orthodoxy to Web 2.0 that defines any criticism a priori as nay-saying, alarmist, or failing to “get it.” Kind of reminds me of the Bush administration’s (now failing) technique for deflecting criticism. In the end, I’d rather err by being alarmist than err by being naive.

But let’s say that I’m completely wrong (which is very possible), and that MySpace is good wholesome fun for people under 18. From a business perspective, the issue is not the reality but the PERCEPTION.

Let’s say parents being “alarmists” and media outlets acting as “fear mongers” are being unjust towards MySpace — if advertisers come to PERCEIVE that their ads on MySpace may appear next to content they really can’t fell good about, I still fail to see how MySpace will be a cash cow.

But NO, Web 2.0 will argue, advertisers need to stop insisting on control. Consumers are in control.

Well, indeed they are. Media and marketing has become fundamentally social. But society only functions when there are some shared norms and standards — and some laws to protect people’s rights from being violated. In a democracy there is a constant debate over what the laws and standards should be, but there’s no question that there need to be SOME.

If we say to people, especially children, here’s a place where anything goes, you can’t depend on individual restraint and responsibility to prevent people from getting hurt — especially people who are 18 — as a society we have decided that people under 18 DO NOT have sufficient judgment to make certain decisions, e.g. voting and drinking.

I may sound awfully moral, but I’m not advocating for any particular standard. I just saying that there need to BE some.

Tweet This Post  Share on Facebook