iMedia Connection

Will Facebook's Heat Make MySpace Meat?

Michael Estrin

By every measure, Facebook is nipping at the heels of MySpace, the reigning champion of all things social media. Earlier this month, comScore reported that Facebook had seen a "flood of new users" after expanding its network beyond the college crowd last September.

According to comScore, Facebook had 26.6 million unique users in May, an 89 percent increase over the same time last year. Likewise, Nielsen//NetRatings also concluded that the social network had graduated to the big leagues, reporting a 110 percent spike in unique audience, from 7,898,000 in January last year to 16,547,000 this January.

Of course, MySpace grew as well, with a 30 percent jump in unique audience over the same time period. But if you're tracking momentum, it's Facebook's world.

While Facebook has become a Silicon Valley darling, it hasn't answered the most important question facing it: Will advertisers embrace the site in the same way they've touted the virtues of Rupert Murdoch's social-networking juggernaut? But to answer that question, one has to unlock the key to what makes a good social networking site.

Are you on Facebook?
Sitting in a recent iMedia staff meeting, our Editor in Chief Brad Berens asked the Culver City, Calif. office why he was suddenly getting so many Facebook friend requests. Exclamations from others in attendance indicated that Brad was not alone. Facebook, it seems, is everywhere these days.

In a nutshell, Facebook is hot. It's buzz-worthy. But for all of the love Silicon Valley wonks heap on the site, the heat might not mean much.

At the turn of the millennium, a site called Friendster was really hot, so hot that it made many of us still recovering from the dotcom bubble ignore the almighty question that troubles all great internet ideas: How will they monetize all that traffic?

The fact that I remember Friendster at all means I'm basically a digital dinosaur, but for many people around my age (29), Friendster was the first social networking site they joined. And in its amazing ascent and spectacular collapse, there is a lesson for would-be social networks and interactive marketers alike: Social networks aren't pure publishers. They are digital glue that people use to connect to each other, which means that how the site connects people and whether the site continues to be a meaningful way of connecting, people will determine the viability of it as an ad platform.

Unlike a static website or a TV program, it's not enough to have a large audience with a desirable demographic. The site has to actually work. 

Within a few weeks of signing up on Friendster, I reconnected with about 50 people I had lost touch with after graduating college, and I made some new friends, too. If there were ads, I don't remember them, but that wasn't the point of Friendster, which everyone thought was going to be the next big thing online. From a user perspective, Friendster did two things exceedingly well: It helped you find long lost friends, and it reminded you of important dates that you should've remembered but were too lazy to input into your Outlook calendar.

But then Friendster just vanished.

While I can't pinpoint the moment my friends and I migrated to MySpace, I can say that I don't even remember my Friendster password. The site, like so many other hot internet properties, simply fizzled.

Was MySpace all that better? Maybe. It let the users have more control over their pages, giving it a freedom-loving anarchic appeal that continues to this day. Friendster, by contrast, never got that. But the same could be said of Facebook, which has only now slowly started to open up the floodgates to allow extreme user self-expression.

But questions like how much room users should be allowed to personalize their pages are really just tactical considerations for the sites themselves. What matters for users initially and advertisers over time is that the site reaches a tipping point in terms of membership. While MySpace is probably there already, Facebook seems to be closing in on the mystery magic number that equals marketing gold.

The herd, self included, moved to MySpace because one day it just seemed like everyone you knew was on it. In fact, there are times when I think about quitting MySpace altogether, but then I realize that quitting MySpace (at this point in time) is tantamount to canceling my broadband connection and reverting back to dialup. Facebook certainly had that critical mass with the college crowd, but now that it's completely open, it's hunting for the same level of awareness MySpace seems to have wrestled away from Friendster.   

The challenges of life after college
When I spoke to Mike Murphy, Facebook's VP of media sales, for this article, one of the first things he asked was whether I had joined the site.

Sheepishly, I told him that I was a new member with only a handful of friends. When I asked him to give me a crash course in what makes Facebook unique, he hit me with some bad news. Facebook, he explained is actually a collection of about 50,000 smaller social networks, with each member belonging to several networks. My social network, with a pitiful number of friends, isn't really viable (yet) from a user perspective, nor is it enticing to an advertiser, either. But some of the larger networks on Facebook, the ones built by college students, the original pioneers of the site, are both enticing to advertisers and exciting for users.

The challenge for Facebook, according to technology blogger Mark Evans will be to assimilate new users like me while keeping the old guard happy in an increasingly ad-driven environment.

"What many people like about Facebook is it has a clean, easy-to-access look and feel," Evans wrote. "You login, you quickly see what's been happening in your world, and you do your thing. What happens when Facebook starts to introduce more advertising into the mix so it can start taking advantage of its billions of page views? Suddenly, the lean look disappears as the business model starts to move onto the scene."

Next: Facebook Ad.0

Return to Page 1

While he's concerned about how users are reacting to the changes at Facebook, Murphy says the site's early fans are rolling with the punches, even if they don't know it.

When Facebook launched News Feed, a tool marketers can use to slip relevant ads into a user's data stream, the site saw a minor rebellion.

"When we first announced News Feed, we had about 700,000 users come together as 'students against News Feed,'" Murphy explains. "Time Magazine called it the largest college protest since the Vietnam War. But the reality of what happened is that the students wouldn't have been able to come together that way if it hadn't been for News Feed, which they used to spread the word of the protest."

Irony aside, the News Feed backlash, which has since subsided now that users better understand their privacy settings, illustrates the potential value proposition of a Facebook campaign.

According to Murphy, the one-to-one appeal of Facebook can deliver on a mass-scale is what makes the social-networking site tick.

In a campaign with Chase Plus One, the financial institution used Facebook to engage potential customers on issues that mattered most to them.

"Chase wanted to create a relationship with college students," Murphy says. "What they found was that many of our users didn't think they could make use of the bank's rewards points system. The bank used Facebook to educate its customers about the rewards system by letting them share their points for joint-purchases and charitable donations."     

But did it work?
While Murphy says the Chase campaign was a huge viral success, pointing out that many similar marketing efforts get higher interaction rates from trusted friend referrals than from items directly inserted into News Feed, questions still linger about the Facebook audience and its receptivity for ads.

Neither MySpace nor Facebook would comment on the record when asked to discuss clickthroughs. In their own way, each said such data was both confidential and campaign-specific and therefore not relevant to anyone beyond those responsible for the campaign. But it is Facebook that has been most savaged in online gossip pages.

In March, Nick Denton called Facebook out in a Valleywag post, saying the plucky upstart was a terrible platform for ads, with a .04 percent clickthrough rate, as compared to .10 percent for MySpace on similar campaigns.

"Media buyers, the agency people who book campaigns, report that the college social network is a truly terrible target," Denton wrote. "They're mainly students, with low disposable income, of course; but, beyond that, the users appear to be too busy leaving messages for each other to show much interest in advertising."

Minus the hard-to-read chart that Denton provided in his post, GigaOM blogger Robert Young made the same observation, reporting that the Madison Avenue scuttlebutt was that campaigns run on Facebook had been big disappointments.

To compound matters, BizReport updated the same rumors of lackluster performance for Facebook campaigns, with a similar story last week.

But Facebook disputes those rumors, saying advertisers have had a lot of success tapping into the site's audience.

"We could target a number of different ways, but we choose not to," Murphy says. "What Facebook does is rely on self-reporting data from its users to serve up relevant ads."

According to Murphy, the authentication process required of Facebook users before they join means that people are who they say they are, which means that the highly relevant ads will only scale as the site continues to grow.

But one doesn't have to take Murphy's word for it when it comes to the Facebook crowd. University of Texas psychologist Samuel D. Gosling told US News & World Report that Facebook users don't deviate much from their online personas. From a marketing perspective, that means Facebook is capable of delivering almost exactly what you see.

If you're marketing Malibu Rum, you should get a good response from users who identify themselves as drinkers. And better still, you should be able to accurately determine if Facebook has a healthy population of drinkers before you launch your campaign. On the other hand, if you're marketing life insurance (a product young people aren't likely to think about), you might be lost in a sea of 50,000 smaller social networks without much of a map.

For now, the vote is still out.

In the meantime, while a growing social scene on Facebook may increase the site's utility for me, and by extension make it a better launching pad for ads, MySpace, with 67 million active members, continues to rule the roost. That's not so much a knock on Facebook as an observation that only now are we beginning to witness the start of a potential tipping point for Facebook. Remember the original query Brad posed to the iMedia staff? Why am I getting so many friend requests from Facebook? 

By definition, social networks are egocentric creations. If they don't work for you, they simply don't work. If you ask me about Facebook, I'll tell you I'm still waiting. But in the digital age, that could mean my answer may be here as early as tomorrow morning when I check my email. But if you ask me about MySpace, well… when this story posts, I'll be on a date with a girl I met on, you guessed it: MySpace.

So what does that mean for an ad campaign? If you want to play in the social networking space, it's MySpace for today, perhaps Facebook for tomorrow, and who knows what in the future.

A final word from the lawyers
At press time, Facebook was defending itself against a lawsuit filed by ConnectU, a site Zuckerberg had been associated with while studying at Harvard. In the case, the ConnectU founders have alleged that Zuckerberg stole their idea when he created Facebook. While Facebook insists that the case is without merit, an adverse ruling could shut down the site and/or result in Zuckerberg losing control of the company, according to a report in The International Herald Tribune.

Michael Estrin is associate editor at iMediaConnection. Read full bio.