What Facebook Can Learn From Justin Timberlake and Myspace

With Facebook having ultimately gained the edge in social media, what can Facebook learn from Myspace about user engagement?

Aug 17, 2014 at 2:00PM

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Credit: Myspace.com

Facebook (NASDAQ:FB) and privately owned Myspace are both social networks, but are vastly different in terms of popularity. The former is a shrewd adapter and one of the highest-traffic sites in the world. The latter is essentially a case study in corporatization and a failure to adapt. If any site could learn something from the other, I'd bet you'd say Myspace could learn something from Facebook ... and you'd be right, mostly. However, there is one thing Facebook could learn from Myspace: music integration.

Myspace's history
Founded in 2003 by Chris DeWolfe and Tom Anderson, Myspace was created with the idea to recreate and emphasize Friendster's more social and popular features. Initially a project from eUniverse -- now Intermix Media -- the company used its extensive email list to build the Myspace brand. What followed was tremendous growth; by 2005 Myspace was one of the most heavily trafficked sites in the world by Alexa rankings.

The company's success was carefully watched among traditional media companies whose ad revenue had slowed somewhat in the wake of the Internet revolution. What followed was a bidding war among the largest names -- and personalities -- in media, with News Corp.'s Rupert Murdoch outbidding Viacom's Sumner Redstone. Redstone quickly moved to can then-CEO Tom Freston.

However, in an ironic twist, it appears the typically shrewd Rupert Murdoch struck out with this deal. Not only saddled by the "winner's curse" of bidding by paying $580 million, although the company provided a few solid years of growth, Murdoch never felt he got a great return on his investment. Among intense competition from Facebook, and others, Murdoch sold the company to a group of investors -- including Justin Timberlake -- for a mere $35 million, 6% of what he paid for the site.

Many blame Myspace's demise on a host of factors: a Google ad deal that required a large amount of ads to be placed on the site, a traditional-media owner looking for any way to monetize the brand, and the firing of key Myspace executives. In short, many blame corporatization for Myspace's eventual demise by taking the focus off of users.

Facebook: An appended history
Much more ink has been spilled over Facebook's meteoric rise -- and for good reason, the company is one of the best examples of a rags-to-riches story this century. Started in a Harvard dorm room in early 2004, the site took off in terms of popularity -- Zuckerberg dropped out of Harvard soon thereafter.

Sure, there were bumps. After a groundswell of support for its initial public offering, the company had a particularly rough patch. After its botched IPO -- not Facebook's fault -- that led to many investors swearing off the stock, the company continued to face questions concerning its mobile monetization strategy. So far, Facebook has been able to address those concerns well and is sitting near all-time highs.

With that being said, music is still one area where Myspace presents a better, more-cohesive user experience to Facebook

Music as a differentiator
Myspace has a long and storied history of including music as a part of the user experience. In 2005, it even launched a music label and many well-known artists have been discovered by the company including Sean Kingston and Owl City. In addition, the streaming music format is becoming more popular with streaming services Pandora, Rdio, and Spotify -- among others -- growing by the day.

And for what it's worth, it appears Myspace is in the midst of a modest turnaround. Billboard reports Myspace attracted 28.3 million unique U.S. visitors in June. A laughable figure when compared to Twitter or Facebook, but when one considers the company only had 6.2 million visitors in January, an increase of 356% is a solid start. Many factors are credited, but content is among them including a new music video series.

And it isn't as if Facebook doesn't integrate music into the experience, Facebook allows streaming apps on their site but the curation, format, and song-selection process is performed by the actual streaming service itself. The end result is a musical experience that accentuates Facebook but doesn't add tremendous value in terms of active users or minutes viewed.

However, Facebook has a blueprint for a way to incorporate music into its site. Long faulted for having a difficult and "clunky" interface, Myspace has created a easy-to-navigate music site that allows artists to directly upload songs and communicate with fans. Whether Facebook decides to go at this alone (like Myspace) or bring in a third-party expertise, this can help Facebook's top line both directly by taking a portion of each sold song and indirectly by increasing both active users and average viewing times. 

Final thoughts
While it's quite apparent that Facebook has succeeded in many ways where Myspace has failed, music as a differentiator is still an area where Myspace stands out. If Facebook wishes to continue its amazing top-line growth, it must seek to grow viewing times among increasing saturation rates in developed (read: marketer-desired) countries and for new avenues to make money.

If Facebook can add value by redefining its musical experience by either creating a better music-based offering or a bolt-on-acquisition, it can fill that niche. Facebook is haunted in many ways to not become the next Myspace, but this is one area they could learn from the fallen site.

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Jamal Carnette has no position in any stocks mentioned. The Motley Fool recommends Apple, Facebook, Pandora Media, and Twitter. The Motley Fool owns shares of Apple, Facebook, and Pandora Media. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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