News Corp.'s (NYSE:NWS) MySpace has become the dominant superstar in the world of Web-based social networking -- but has its time already come and gone? Ideas are already percolating online about the future of MySpace and similar sites.
MySpace is wildly popular, especially with younger Internet users; if you skew the numbers right, you can even argue that it's surpassed veteran Internet giant Yahoo! (NASDAQ:YHOO) in traffic and visitors. In a recent interview with Germany's der Spiegel, MySpace co-founders Tom Anderson and Chris DeWolfe confidently declared that their site has replaced Viacom's (NYSE:VIA) MTV as pop culture's top tastemaker. (Me? I'd remind them that social networking sites rely on fickle audiences, always ready to jump ship to the next cool site.)
Meanwhile, according to Ireland's Silicon Republic site, consulting firm Deloitte Global is predicting a change in the business model for social networking sites, believing that social networking sites will begin charging a premium for privacy. Such a move could be more than just a response to demands that MySpace better protect young members from disguised sexual predators. Deloitte also proposes that older users might not want their employers, friends, and relatives to know how they let their hair down online. The group also predicted other subscription-based revenue drivers in social networking, including voice chat, online storage, and Web page design.
Social networking is wildly popular, but it hasn't been easily monetized. Too much blatant advertising on a site like MySpace could alienate media-savvy users. And while many companies are trying to use social networking to their advantage, their efforts remain very much in the experimental phase. (I recently wrote aboutProcter & Gamble's (NYSE:PG) Capessa site at Yahoo! Health, which is pointedly steering clear of too much commercialization.)
While online privacy is an increasingly prized commodity, I'm not sure people will be willing to pay for it, considering how many formerly fee-based sites -- most notably Time Warner's (NYSE:TWX) America Online -- are shifting to free, ad-supported business models. And who's to say users won't consider privacy a right, not a priviliege, and avoid any site that demands a fee to protect their confidentiality?
I personally never enjoyed MySpace; I felt too exposed, especially to emails from complete strangers. I opted to make my profile private -- and then stopped using the site altogether. It always made me feel like I was hanging out on the seedy side of town.
Fool contributor Stephen Ellis recently wondered whether MySpace's 15 minutes of fame were drawing to an end. It's proved difficult to monetize the service by attracting a solid advertising base, despite MySpace's popularity; the site's anything-goes mentality makes it a little risky for many advertisers. (In the Spiegel interview, Anderson and DeWolfe defended the site's track record, noting that it's only been around a couple of years, and stating it's going to make "a couple of hundred million dollars" through advertising next year. They also mentioned Google's (NASDAQ:GOOG) big payment to provide search on the site.)
Nonetheless, MySpace is definitely a force to contend with in the social networking space. The evolution of such services is certainly far from over, and companies won't stop seeking ways to make money off such sites any time soon. But when it comes to today's young Web junkies, those firms may find that furnishing the fun -- and profiting in the process -- is easier said than done.
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Alyce Lomax does not own shares of any of the companies mentioned.
