Traffic is Good. Money is Better.
Matt Marshall from VentureBeat reported today that MySpace expects to hit $1 billion in revenue this year, up from $850 million last year. So much for the theory that web-based advertising is not a sustainable business model for social networks.
What I found more interesting about the article though is that MySpace’s number one competitor, Facebook, is struggling to monetize their ads (~$300 million expected revenue) even though they have surpassed MySpace in terms of traffic. So what’s the problem?
Ad Content
I am not a user of MySpace, so I can’t comment on the firsthand effectiveness of their advertisements. But I imagine their ads are better than the ones I’m currently staring at on my Facebook profile, which include “Straight Teeth, No Braces” and “$99 Dental Whitening”. My dental hygiene is just fine, thank you. And furthermore, where are they getting the impression that I need dental work? Nothing in my profile, which is fairly rich with data once you take into account my network of friends, suggests I need help with my teeth. On a refresh of the page, I see “NYC Bars That Don’t Suck”. New York is listed as the current city in my profile, so I give them partial credit for picking up on that basic fact. I’m still not clicking.
“Growth is primary, revenue is secondary.”
I found that quote in FAZ.net’s recent interview with Facebook CEO Mark Zuckerberg. Of course growth is important, but why deemphasize the importance of revenue? Growing one’s customer base to reach critical mass is top priority for fledgling startups, but Facebook is a mature platform capable of churning out big dollars. Furthermore, domestic U.S. growth is on auto-pilot for Facebook. I only became a member of the site very recently, and it certainly had nothing to do with the company’s marketing efforts. I simply found that so many people I associate with were on Facebook that it didn’t make sense NOT to join. When your network alone fuels growth, it’s time to cash in.
I like Facebook’s technology and I’ve spent plenty of time building my network, so I have vested interest in seeing them succeed. However, I’m not impressed by the company’s cocky attitude towards making money. Revenue, not traffic, will determine the company’s sustainability – a truth that is becoming even clearer in today’s challenged economy. MySpace understands this point, and they’ve got much deeper pockets to begin with due to their parent company, News Corp.
Traffic is good. Money is better.
Tags: facebook, myspace, social networking, web 2.0, zuckerberg
