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Could What Happened to MySpace Happen to Facebook?

Posted by Ram Kumar Shrestha on July 16, 2011


By 

Ben Bajarin is the Director of Consumer Technology Analysis and Research at Creative Strategies, Inc, a technology

DAVID PAUL MORRIS / GETTY IMAGES

industry analysis and market intelligence firm located in Silicon Valley.

Social networks have been in the news lately. Last month MySpace was sold and we learned that Justin Timberlake and his partners have decided to try and help it be successful again.

(MORE: Myspace Sold for $35 Million with ‘Significant Reduction’ of Staff Imminent)

Google has just launched a new service called Google+ that has the blogosphere asking if it is a Facebook killer. So the question I want to explore is whether or not what happened to MySpace could happen to Facebook?

Facebook Learned from MySpace’s Errors

MySpace fell from grace for several reasons. First, they sacrificed the service’s integrity in pursuit of monetization. For those who remember, the user experience declined drastically once the service hit a critical mass.

We were bombarded by ads—highly irrelevant ones and many of a sexual nature (at least mine were). There came a point in time where I literally said to myself that the service had become unusable. I heard the same from a plethora as others as well. The turning point was when they lost control to the advertisers. Their monetization strategy was poor and because of that the site went downhill.

The second reason was because they failed to innovate in order to meet the needs of their users. In short, MySpace ran out of ideas. The site started with the humble idea of giving people their own spaces on the web but never evolved it into much more.

Facebook, on the other hand, has taken a different approach. They have not only been innovating and evolving the service to meet the needs of their users, but they have also been employing a business model that actually works for the service and is valuable to people. This model includes the subtle yet relevant placing of ads.

Facebook has innovated and monetized without sacrificing their network’s integrity for the almighty dollar. Facebook also has another market force in their favor, and that is the philosophy of “sunk costs.”

Understanding Sunk Costs

Sunk costs are what make customers loyal. The overall concept is that when a consumer has sunk costs, they factor those into future decisions related to competing products. Sunk costs are generally of a monetary nature but more often than not, the sunk cost of time may be the post powerful.

This is a major factor that Facebook uses to their benefit and gives them a huge competitive advantage over any other social network sites. Now over 750 million people are sinking time and energy into putting their lives on Facebook. This is the network they have decided to spend their valuable time on to develop and embrace with their digital lives.

Beyond that, Facebook has nearly double the engagement time MySpace had. The last ComScore numbers I saw reported that, on average, people spend upwards of eight minutes a day on Facebook from a computer; from a mobile device, the average time was 12 minutes per day.

At this point it would be hard to imagine what any service could offer that would get consumers to abandon all the work they did on Facebook and begin it all again at another destination. And it would take a monumental error on Facebook’s part to go the path of MySpace. Of course, anything is possible and if Facebook somehow had a massive security issue that caused them to lose their customers’ trust, they could have a hard time recovering.

So What About Google+?

There are some very compelling things about Google+: things that I think are extremely interesting. Circles for example, where you can organize all those you connect with on Google+ into a designated circle. The value of doing so is that when you decide to share something, you can choose specifically which circle to share it with. This is a problem Facebook has since many consumers private and work lives have collided on the service.

(VIDEO: How Google+ Works)

However, what’s to say that Facebook couldn’t steal this idea from Google and make it very easy for you to separate all your Facebook connections into groups? You would then be able to decide which content you share is appropriate for which group. In reality, only time and engineering resources are needed for Facebook to duplicate this concept since they already have a basic grouping feature in place.

Google+ has a lot of potential. However, they are in the trust-gaining mode, which will take some time to develop. I’m also not convinced Google+ is trying to be a social network or that it is really targeting Facebook at all. In fact, I think Twitter may be more the target than Facebook. Many of Google+’s features are similar to Twitter but add a level of engagement that goes beyond what Twitter offers.

Google+ may be designed to be a social service more than a social network. Google is a services company and Google+ may be designed to integrate and add value to their other services like Gmail, Calendar, and Docs. That could be where the real value kicks in, but it’s still too early to tell.

So can what happened to MySpace happen to Facebook? Of course it could. However, there are currently no signs to say that it will. Facebook has created a very sticky service that is connecting people around the globe, and the company isn’t running out of ideas.

As long as they keep innovating and meeting the needs of their users, I don’t expect anyone to knock them out of their # 1 position in social networks.

MORE: Why Google+ Won’t ‘Kill’ Twitter

@TIME

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