Mark Zuckerberg is not very popular according to a 2021 poll by Morning Consult, 54 of Americans have an unfavorable view of the Facebook founder compared to just 22 who have a favorable view, It's not hard to tell why. With Facebook's numerous user privacy scandals over the years, as well as controversy around the platform's effect on Teen Mental Health 72 percent of Americans think the social network has too much power. Despite the overwhelming unpopularity of Meta and its founder, people can't resist using it. Across the company's family of apps, which includes Facebook, Instagram Messenger, and WhatsApp, they have 3.8 billion monthly active users.

This represents the majority of the world population excluding China where Meta's apps are banned. Not only are people continuing to use Meta's existing apps, but they're even willing to try new products that companies rolling out on. July 5th, 2023, Meadow launched a new app called Threads, a text-based social media platform similar to Twitter. Within less than a week, it surpassed 100 million users, making it the fastest growing application ever.

The conventional wisdom amongst most analysts is that Meta benefits from Network effects. If all of your friends are already on Facebook and Instagram you have no choice but to use these platforms as well. If you tried using a competing platform instead, none of your friends would be there, so there would be nobody to talk to. This creates a massive barrier to entry, making it very difficult for a competitor to take away any of Meta's dominant market share.

However, this Theory may not be true when Facebook was open to the general public in 2005. Another social networking site called Myspace.com had just signed on as 100 millionth user. Myspace was owned by the media giant News Corp which had hundreds of millions of dollars that could invest into the platform. Given Myspace's Head Start and The Winner Takes all nature of platform companies Facebook shouldn't have stood a chance.

It was truly a David vs Goliath battle, yet shockingly Myspace managed to snatch defeat from the claws of Victory and has lost more than 99 of its users since its beat as of 2023. Myspace still exists, yet so few people use it that they resort to filling the home page with licensed pop culture articles to prevent it from being completely empty. Meta, on the other hand, has almost 4 billion users, an 800 billion dollar market cap, and with the recent launch of Threads appears to be more popular than ever in this video. we'll take a deep dive into how Myspace became the world's largest social media platform in the mid-2000s and how they lost everything.

The unexpected collab apps of Myspace 10 years ago as well as the recent meteoric rise of Threads shows how fast-paced and unpredictable the social media landscape can be. This creates unique challenges for marketers. As in today's market building, a social media presence is no longer optional. That's why we're so excited to share with you the 2023 Social Media Trends report by today's video sponsor: HubSpot Based On data from over 1200 marketing professionals, This report is a gold mine of insights from identifying the right platforms for your Target audiences, the increasing impact of micro influencers, to the ways AI is being utilized by Savvy marketers.

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Thank you! The first ever social network site was called Friendster and was founded in 2002. It allowed users to connect, share posts, and send messages to friends who were also part of the digital Community Its unique feature was the Mandate for users to display their real names on their profiles a move designed to Foster an atmosphere of authenticity and trust and to discourage spam or fraudulent activity. If you were found to have put a fake name on your friends to your profile, your account will be deleted. This well-intentioned requirement, however, wasn't favored by everyone, particularly a young Tech employee named Tom Anderson at the time he was working for a tiny company in Los Angeles called E-universe E-universe was an email marketing company.

Basically, they would help advertisers set up email spam campaigns Anderson Took issue with Friendster's approach. He believed that the insistence on using real identities could deter potential users who wish to maintain a degree of separation between their online personas and their real world identities. Seizing an opportunity, Anderson conceived an idea to launch a social media Network that would taken inspiration from Friendster but diverge on a crucial Point allowing users to adopt Anonymous or pseudonymous identities. This notion was particularly appealing to those who value their privacy, presenting an enticing alternative that could draw them into this new platform.

With E-universe's existing prowess in digital advertising, Anderson's proposals seem not just viable, but strategically aligned with the company's competencies. they could integrate their existing advertising Network into this new social media platform, creating a symbiotic relationship between user acquisition and revenue generation. Convinced by Anderson's Vision E-univers put their software Engineers to work and within a shockingly short 10 days, they had coded up their own social networking site. Thus, in the summer of 2003, Myspace went from an idea to a working product in less than two weeks previously, a junior employee Anderson found his role significantly elevated in the wake of Myspace's inception.

as the brain behind the concept, E-universe recognized his contribution by appointing him as President of Myspace a testament to his Innovative thinking and promising leadership potential because they coded it in just 10 days. The website started out pretty basic. It was very similar to Friendster allowing you to connect with other profiles and share text and images. The key difference was that people could use pseudonyms instead of their real names.

One of the most remarkable aspects of Myspace's growth is that its exponential user expansion was accomplished with practically no advertising budget. Early growth was primarily driven by E-universe employees who turned into Grassroots advocates for their platform. They reached out to their personal networks, urging friends to sign up and explore the features Myspace had to offer. As more people joined and began engaging on the platform, the value of being a part of this burgeoning social network exponentially increased for both existing and potential users.

This led to a viral spread propagated through Word of Mouth Encouraged by the initial success, Myspace started rolling out new features, with the most important one being music Aspiring amateur musicians could post their songs on MySpace which people could listen to for free. This provided an outlet for unknown artists to put their name on the map and hopefully kick start their musical careers. And finally, they allowed a high degree of customization of user profiles. They even allowed users to code up their profile page using HTML Creative and tech savvy users made extremely elaborate profile pages with custom colors, fonts, and background images.

The platform's popularity exploded, reaching tens of millions of users within the first year Anderson became a celebrity in Myspace was viewed as the hot new unicorn disrupting the traditional media industry, the meteoric rise of Myspace did not go unnoticed by a traditional media companies. In fact, they were in panic mode. With Myspace having virtually zero content costs, they could undercut traditional newspapers and television channels on cost and soak up all the advertising budgets. In 2005, a bidding war ensued with multiple large media companies going to acquire The Social Network These bidders included but were not limited to Viacomp the company behind Paramount Pictures in Comedy Central and News Corp the company behind the Wall Street Journal in the New York Post.

Ultimately, News Corp won the auction with a 580 million dollar bid for Myspace in a testament to how coveted an asset Myspace was Viacom's board of directors fired then CEO Tom Frestin for his failure to win the bidding war. But as we will see later, Freston's failure to acquire Myspace likely saved Viacom upwards of a billion dollars of losses, but in 2005, nobody was predicting this. Analysts were extremely bullish on News Corp Following the acquisition, News Corp had successfully transitioned from an old school newspaper company to being at the Forefront of the digital age. With Myspace the most successful social media company ever at the time.

foreign 580 million dollars was a lot of money to Shell out, even for a large company like News Corp Also, as a publicly traded company, News Corp was under immense pressure from investors to recoup this cost as quickly as possible despite already having tens of millions of users. Myspace only generated a measly 37 million dollars of Revenue in the year prior to the acquisition. If News Corp wanted to make an acceptable return on investment, they needed to increase this Revenue by orders of magnitude. For the first couple of years, it looked like things were going well.

Myspace continued to grow rapidly, and in the summer of 2006, just one year after the acquisition closed, the website achieved the Monumental Milestone of signing on its 100 millionth user. They also surpassed both Yahoo and Google to become the single most visited website in the world. Things were going so well that in 2007 News Corp founder and chairman Rupert Murdoch publicly boasted that he expected Myspace to generate over 1 billion dollars of Revenue in the next fiscal year. When Myspace employees heard this one billion dollar Revenue Target they went into panic mode.

While their user base was growing rapidly, monetization wasn't growing as fast, and they were nowhere near this extremely ambitious. Revenue Target Myspace's primary means of generating Revenue was showing advertisements on the website. As the number of active users increases, there are more people to show ads to, and revenue should increase commensurately despite their massive audience, Myspace was having a surprisingly difficult time convincing advertisers to allocate even a small part of their budget, and there was a simple reason for this. Today, most social media platforms enforce content moderation policies where they won't allow certain types of posts.

A large part of why they do this is because they learn from Myspace's mistakes. While Myspace technically did not allow nude photos and other types of controversial content, they did little if anything to enforce these policies. Consequently, the platform became something of accessible for pornography, scams, spam, and generally creepy. Behavior The fact that people didn't have to use their real names gave many users a sense of impunity to use MySpace for inappropriate, malicious, and in many cases illegal.

Behavior There was a particularly tragic case in 2006 when a woman created a fake Myspace profile of a 16 year old boy and reached out to a 13 year old girl in the neighborhood. The fake profile manipulated the 13 year old girl, ultimately leading to her suicide. This case garnered substantial media attention and resulted in growing criticism of Myspace's lack of content moderation and the shocking ease of making fake profiles. While extreme events like the suicide case were very rare, almost everyone on MySpace was bombarded by friend requests from obviously fake accounts which usually tried to suck users into online scams.

Because of all the controversies, many large, respectable Brands didn't want to touch Myspace with a 10-foot pole. Instead of trying to clean up the platform, they instead dumpster dive, to placing ads for shady companies like scammy online dating services and weight loss supplements of dubious ethics. Z Many people were taken aback by the scammy ads and stopped using Myspace This created a negative feedback loop where most people who stayed on MySpace were rebellious youths who didn't have much money and were not very valuable to advertisers. So Myspace had no choice but to Double Down accepting even more unscrupulous advertisers.

News Corp strategy of aggressively advertising did work in the short term and in 2008, they did in fact reach their target of one billion dollars of Revenue But this came at a huge cost in an effort to increase. Revenue News Corp Hired hundreds of new employees to work as salespeople trying to convince advertisers to spend money on the platform and for the reasons we discussed previously, these salespeople had a very difficult job. Also, it wouldn't be fair to say that News Corp neglected product development. They hired hundreds of Engineers to roll out new features such as supporting videos, a MySpace email, and many other features.

The problem is, Newscorp didn't have expertise in software, so the development was inefficient and most of the new were played by bugs and glitches. This caused the expense space to explode. By 2010, Myspace was generating an operating loss of more than 400 million dollars despite having more than a billion dollars of Revenue By this point, the Social Network had generated cumulative operating losses of 750 million dollars since the acquisition closed. Remember that they also spent 580 million dollars up front to acquire the platform, so their total investment was well over one billion dollars.

But even more concerning than the losses was the fact that Myspace's user growth stagnated and then started to decline in 2008. in 2009 they lost their title as the world's biggest social media company when they were overtaken by a new startup called Facebook foreign by Mark Zuckerberg from his Harvard dorm room and he launched it in 2004, but it wasn't open to the general public until a year later. By this point, Myspace already had tens of millions of users, especially after the News Corp acquisition in 2005. Myspace's Executives weren't concerned about Facebook Myspace had such a massive first mover advantage in News Corp could afford to invest hundreds of millions of dollars to fund further.

Innovation They didn't take a small startup launch from a dorm room seriously. Even as late as 2007, Myspace co-foundered Tom Anderson Publicly say that I didn't view Facebook as a threat part of the reasoning, but it was the Advent of Facebook Mean, um, it's obviously not nearly as popular right now as Myspace is, but it is picking up a little bit of steam. How do you guys deal with that? Yeah, I think Facebook is is quite different. You know it's mostly people talking to each other that know each other and Myspace has always been more open.

You can set your Myspace so that you only talk to your friends. A lot of people don't even know that, but you know Facebook is more about who you know and my space is more about you know, meeting more people and the people you know. And you know music and video and all these different cultural aspects. So you get what Tom Anderson said in that interview was all true.

The problem was he failed to recognize the significance of Facebook's different approach. just like Friendster Facebook required users to use their real name on their profiles. Because of this, people used Facebook to connect with their friends that they already knew in real life or at least live within their area. because so many people use anonymous profiles on MySpace people's friend groups would consist of random people they didn't know who happened to share the same interests.

In this way, Myspace became more like Reddit or 4chan, which has a much more Niche appeal than Facebook. But even more importantly was that Zuckerberg was first and foremost a technologist. He was solely focused on building the technology to power the platform. For the first few years.

they didn't even have any advertisements or revenue and were completely dependent on Venture Capital money. While Myspace's creators did have technical competence, they were first and foremost advertising people. so they turned on monetization as soon as possible and gave this much more Focus than the technology itself. The problem became even worse following the News Corp acquisition and the overly aggressive short-term Revenue targets.

Facebook's technological superiority was exemplified with the proliferation of third-party apps and games such as Farmville that were available on the platform. While these games look basic for today's standards, they were revolutionary at the time and Drew huge amounts of users to the platform. They also put a much greater emphasis on content moderation. While there are still scams and spams that fall through the gaps, it was far cleaner than Myspace, which is like the Wild West.

Myspace Knew their lack of content moderation was a problem, but with hundreds of millions of registered accounts and billions of posts, sorting through this fire hose of content is an extremely difficult proposition. Myspace and News Corp frankly didn't have the technical competencies to do this effectively. When Myspace saw the success of Farmville and other Facebook games, they also opened up their platform to third-party developers. But because Myspace used a different programming language than Facebook, it would be extremely costly for third-party developers to convert their Facebook games to Myspace.

Also, the programming language Myspace used was out of date according to one Myspace executive. It took 10 to 15 times longer to code an app on MySpace than Facebook. They could have changed the website to a newer programming language, but this would cause disruptions to their ad sales and News Corp would fail to reach their revenue targets. Given that usership was already declining, building apps on MySpace simply wasn't worth the effort for most third-party Developers.

By 2011, it was obvious that the Myspace acquisition was a complete disaster. Between the purchase price and the operating losses, New Scorp had burned well over one billion dollars. Rupert Murdoch Realized that News Corp was way out of its league and they had no realistic chance of competing with Facebook. He eventually admitted publicly they screwed up Myspace in every possible way.

At the end of the day new Scorpius and advertising mindset to try to run a technology company no matter how good you are at advertising. If your technology is subpar, you won't have any users to show ads to. They finally cut their losses and sold Myspace to a Consortium of investors including the Pop star. Justin Timberlake The sale price was 35 million dollars, a tiny fraction of what News Corp originally paid.

At this point, they were basically just paying for the brand in Myspace.com domain name. Timberlake formed a partnership with Panasonic to integrate Myspace into Panasonic televisions. This ended up being a complete failure after the Panasonic Venture failed. Myspace was sold a couple more times and is currently owned by a digital media company called Dot Dash.

Meredith. It still exists today, but is a sad shell of its former self. So few people use it that they resort to filling the homepage with licensed tabloid articles otherwise it would be completely devoid of life. There are still a few hardcore fans who continue using the platform to this day, but the number is so small that the site is for all practical purposes, worthless.

The rise and fall of Myspace shows that even in the world of social media, the first mover advantage in network effects can only take you so far no matter how big you are. If a competitor comes along with better technology and a better user experience, you can fail just like any other company. Alright guys, that wraps it up for this video. What do you think about Myspace? Let us know in the comments section below.

As always, thank you so much for watching and we'll see you in the next one! Wall Street Millennial Signing out.