The success of the company MySpace: Not really "viral" start
In less than 3 years, MySpace hit the top five most visited sites in the United States, reaching 48 million unique visitors and 27.4 billion page views in June 2006. The site will probably never get close to the profitability of Google, eBay, or Yahoo, but it has the potential to become New internet platform.
Key success factors
Providing users with ample opportunities to control their MySpace pages, more opportunities for self-expression and communication with friends.
Probably, there are several reasons that ensured success for MySpace, but this one should be the main one. MySpace was a big hit with teenagers, they used the site to share photos, communicate with friends and create their own online space. Independent musical groups have found an audience on the site and the possibility of self-realization. Also, people used MySpace for dating, mostly people of 21-26 years old, not quite the same audience that is using MySpace now.
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It is difficult to overestimate the importance of the possibility of sharing photos on this site. The increase in the number of digital cameras and camera phones has impacted social networks in general, and not just MySpace.
MySpace has provided the ability to use third-party photo hosting sites, such as PhotoBucket and ImageShack. This is probably the second key factor in the success of MySpace regarding the Friendster startup.
Quick adaptation of the product at the request of users, speeding up the development cycle.
What did MySpace really do to create an environment for self-expression? It began with a basic strategy not to influence the way users interact with the site. When users began to create groups of pages on interests and communities, MySpace accepted this behavior, while it was not done in Friendster. MySpace has been following feedback from users - considering it when developing a product. Blogs, forums, announcements, comments, IM were added to MySpace long before Friendster did. When users began to “hack” their pages to embed photos and graphics from places like PhotoBucket, MySpace did not stop this behavior. They added the ability to add photos and graphics when commenting pages.
Use a combination of viral tactics, offline advertising, and online partnerships to create an initial user community.
At first glance, it seems that MySpace was running, and it acquired a user base using word-of-mouth and viral marketing (these are two slightly different ways to promote). This is not the case. MySpace used a combination of tactics, including traditional CPA campaigns (with pay per attraction), which gave a successful result.
MySpace was created by the team that founded ResponseBase, Intermix, which had experience in direct e-mail marketing and CPA tactics.
As soon as MySpace acquired the first million users, the virus effect began to work in its purest form. (More on this will be discussed in the Launch Strategy section.)
Created product and solution contributing to site performance
The third key success factor in the battle of MySpace and Friendster.
First of all, MySpace decided not to display friend chains (friend chains) due to the high load on the site during their dynamic counting.
Chains of friends demonstrate how users are related to each other. MySpace decided not to introduce this key opportunity of Friendster, wishing to keep the site high speed.
Secondly, MySpace at the very beginning limited the possibility of registration. Registration was only possible for users living in the USA, and Friendster was a great success (and remains successful) in the Philippines. Unfortunately, until the moment of the attractiveness of the online advertising market in Asia comes, this traffic is more a cost center than a profit generating center. MySpace made the right decision to limit registrations for these users to a critical mass in the United States. Indeed, why should a startup at the beginning of its activity pay for traffic from users who are not attractive from the point of view of advertisers?
Startup strategy
The idea to develop MySpace together with Intermix came from Chris Wulfe (Chris De Wolfe) and Tom Anderson, who appeared in Intermix after the takeover of ResponseBase.
Most ResponseBank teams came from X-drive, so they had experience in both online services and direct marketing. After knowing about the initial success of Friendster and having the resources of Intermix / ResponseBank, they decided that they could create decent competition.
ResponseBank had a database of about 100 million e-mail addresses and a number of sites that hit the target MySpace audience.
MySpace spent about 3 months. to create a site with similar features to Friendster. Initially, MySpace did not have a strategy focused on independent musical ensembles, and the creation of a social environment regarding music. It was developed later, as a result of monitoring those who began to actively use the site.
Interestingly enough, MySpace did not find success among users for 6-9 months. after the initial launch and promotion. The promotion began with a promise of remuneration for those Intermix employees (~ 250 people) who helped attract their friends to the site. This action had some success, but relatively small. The next action was the use of the database of e-mail addresses of ResponseBank, which gave some result, but in general was perceived as a failure.
Then MySpace began to promote the site offline, sponsoring club parties in Los Angeles, as well as musical groups. This created a buzz around the site, but most importantly, it attracted a micro-offline community (group of people) using the site together. Small communities - groups of 100 to 1000 people - created a greater “viral” effect than attracting individual users to the site.
As soon as the initial audience was formed, MySpace “added fuel to the fire”, intensifying thanks to the Intermix links and channels. Further, joint marketing with already established Internet brands led MySpace to success.
Output analysis
Intermix was absorbed by the Fox group for $ 580 million in July 2005, with MySpace as the main asset and the acquisition motive. MySpace's estimated value is the difference between the $ 580 million paid by the Fox group and the market value of Intermix (~ $ 100 million) as a public joint-stock company, until the success of MySpace. Thus, the cost of MySpace was about $ 500 million. Probably, an additional factor that influenced the cost of the acquisition was the copyright Intermix problem.
MySpace announced plans for $ 20 million in revenue for 2005.
Gained income in the second quarter of 2005. ~ $ 6M. means that Fox paid with a multiplier at 20x relative to current income. By that time, this was considered an exorbitantly high estimate, although in the year of the absorption of Myspace, it began to earn ~ $ 8 million in revenue per month. Therefore, Fox completed the takeover with a multiplier of approximately 5x relative to future annual revenues, which is already a more logical estimate.
Having received the mainstream brand and cult status created in the USA, Fox turned a very good deal by buying MySpace (especially in light of the last $ 900 million deal between Fox and Google). It also raises the question of how Yahoo, MSN, AOL, and Google missed MySpace if they each predicted MySpace growth.
So, with what results did VC's and founders go out of business?
Redpoint Ventures participated in the promotion of MySpace by investing in Intermix. They invested $ 11.5 million for 25% of the capital acquired in February 2005, according to an estimated preliminary value of the company at about $ 35 million. By that time, MySpace had already succeeded on the Alexa Top 100 list. In Intermix, they wisely entered the item into An agreement with Redpoint Ventures about the possibility of buying out MySpace shares in case of a merger of the company during the year. Under the terms of the agreement, Redpoint received ~ $ 65 million. A great outlet for Redpoint means that venture capital investors do not have to look for the next “Big Thing”, but rather simply maneuver and invest in the next, already existing “Big Thing”. The venture firm that earned the most from MySpace was VantagePoint Venture Partners, which invested in Intermix long before the success of Myspace. As a major shareholder in Intermix, VantagePoint did not invest in the company only because of the success of MySpace, but unwittingly shared the success of MySpace. VantagePoint increased investment by 9 times, investing $ 15 million and receiving $ 139 million.
So, what about the founders, Tom, Chris, and the ResponseBase team?
Despite the unusual ownership structure for a startup (MySpace was an Intermix asset), the ResponseBase team was given the option to purchase 1/3 MySpace from Intermix for $ 50,000. Chris and Tom participated in this “round”, and, considering various bonuses and options, suffice it to say that both became multimillionaires.
Considering the two major web 2.0 success (by the number of registered users) - Skype and MySpace, it is interesting to note that each of them won during the launch, largely due to the developed partnership with distribution channels. Skype began distribution with Kazaa. Since the founders of Skype also founded Kazaa, they had an easy way to get Skype on track by advertising Kazaa’s Kazaa network and Kazaa desktop clients. Despite the fact that Skype and MySpace are inherently “viral” products, they may not have become so widespread in such a short period of time without an initial impulse, thanks to well-established distribution channels.
Key success factors
Providing users with ample opportunities to control their MySpace pages, more opportunities for self-expression and communication with friends.
Probably, there are several reasons that ensured success for MySpace, but this one should be the main one. MySpace was a big hit with teenagers, they used the site to share photos, communicate with friends and create their own online space. Independent musical groups have found an audience on the site and the possibility of self-realization. Also, people used MySpace for dating, mostly people of 21-26 years old, not quite the same audience that is using MySpace now.
')
It is difficult to overestimate the importance of the possibility of sharing photos on this site. The increase in the number of digital cameras and camera phones has impacted social networks in general, and not just MySpace.
MySpace has provided the ability to use third-party photo hosting sites, such as PhotoBucket and ImageShack. This is probably the second key factor in the success of MySpace regarding the Friendster startup.
Quick adaptation of the product at the request of users, speeding up the development cycle.
What did MySpace really do to create an environment for self-expression? It began with a basic strategy not to influence the way users interact with the site. When users began to create groups of pages on interests and communities, MySpace accepted this behavior, while it was not done in Friendster. MySpace has been following feedback from users - considering it when developing a product. Blogs, forums, announcements, comments, IM were added to MySpace long before Friendster did. When users began to “hack” their pages to embed photos and graphics from places like PhotoBucket, MySpace did not stop this behavior. They added the ability to add photos and graphics when commenting pages.
Use a combination of viral tactics, offline advertising, and online partnerships to create an initial user community.
At first glance, it seems that MySpace was running, and it acquired a user base using word-of-mouth and viral marketing (these are two slightly different ways to promote). This is not the case. MySpace used a combination of tactics, including traditional CPA campaigns (with pay per attraction), which gave a successful result.
MySpace was created by the team that founded ResponseBase, Intermix, which had experience in direct e-mail marketing and CPA tactics.
As soon as MySpace acquired the first million users, the virus effect began to work in its purest form. (More on this will be discussed in the Launch Strategy section.)
Created product and solution contributing to site performance
The third key success factor in the battle of MySpace and Friendster.
First of all, MySpace decided not to display friend chains (friend chains) due to the high load on the site during their dynamic counting.
Chains of friends demonstrate how users are related to each other. MySpace decided not to introduce this key opportunity of Friendster, wishing to keep the site high speed.
Secondly, MySpace at the very beginning limited the possibility of registration. Registration was only possible for users living in the USA, and Friendster was a great success (and remains successful) in the Philippines. Unfortunately, until the moment of the attractiveness of the online advertising market in Asia comes, this traffic is more a cost center than a profit generating center. MySpace made the right decision to limit registrations for these users to a critical mass in the United States. Indeed, why should a startup at the beginning of its activity pay for traffic from users who are not attractive from the point of view of advertisers?
Startup strategy
The idea to develop MySpace together with Intermix came from Chris Wulfe (Chris De Wolfe) and Tom Anderson, who appeared in Intermix after the takeover of ResponseBase.
Most ResponseBank teams came from X-drive, so they had experience in both online services and direct marketing. After knowing about the initial success of Friendster and having the resources of Intermix / ResponseBank, they decided that they could create decent competition.
ResponseBank had a database of about 100 million e-mail addresses and a number of sites that hit the target MySpace audience.
MySpace spent about 3 months. to create a site with similar features to Friendster. Initially, MySpace did not have a strategy focused on independent musical ensembles, and the creation of a social environment regarding music. It was developed later, as a result of monitoring those who began to actively use the site.
Interestingly enough, MySpace did not find success among users for 6-9 months. after the initial launch and promotion. The promotion began with a promise of remuneration for those Intermix employees (~ 250 people) who helped attract their friends to the site. This action had some success, but relatively small. The next action was the use of the database of e-mail addresses of ResponseBank, which gave some result, but in general was perceived as a failure.
Then MySpace began to promote the site offline, sponsoring club parties in Los Angeles, as well as musical groups. This created a buzz around the site, but most importantly, it attracted a micro-offline community (group of people) using the site together. Small communities - groups of 100 to 1000 people - created a greater “viral” effect than attracting individual users to the site.
As soon as the initial audience was formed, MySpace “added fuel to the fire”, intensifying thanks to the Intermix links and channels. Further, joint marketing with already established Internet brands led MySpace to success.
Output analysis
Intermix was absorbed by the Fox group for $ 580 million in July 2005, with MySpace as the main asset and the acquisition motive. MySpace's estimated value is the difference between the $ 580 million paid by the Fox group and the market value of Intermix (~ $ 100 million) as a public joint-stock company, until the success of MySpace. Thus, the cost of MySpace was about $ 500 million. Probably, an additional factor that influenced the cost of the acquisition was the copyright Intermix problem.
MySpace announced plans for $ 20 million in revenue for 2005.
Gained income in the second quarter of 2005. ~ $ 6M. means that Fox paid with a multiplier at 20x relative to current income. By that time, this was considered an exorbitantly high estimate, although in the year of the absorption of Myspace, it began to earn ~ $ 8 million in revenue per month. Therefore, Fox completed the takeover with a multiplier of approximately 5x relative to future annual revenues, which is already a more logical estimate.
Having received the mainstream brand and cult status created in the USA, Fox turned a very good deal by buying MySpace (especially in light of the last $ 900 million deal between Fox and Google). It also raises the question of how Yahoo, MSN, AOL, and Google missed MySpace if they each predicted MySpace growth.
So, with what results did VC's and founders go out of business?
Redpoint Ventures participated in the promotion of MySpace by investing in Intermix. They invested $ 11.5 million for 25% of the capital acquired in February 2005, according to an estimated preliminary value of the company at about $ 35 million. By that time, MySpace had already succeeded on the Alexa Top 100 list. In Intermix, they wisely entered the item into An agreement with Redpoint Ventures about the possibility of buying out MySpace shares in case of a merger of the company during the year. Under the terms of the agreement, Redpoint received ~ $ 65 million. A great outlet for Redpoint means that venture capital investors do not have to look for the next “Big Thing”, but rather simply maneuver and invest in the next, already existing “Big Thing”. The venture firm that earned the most from MySpace was VantagePoint Venture Partners, which invested in Intermix long before the success of Myspace. As a major shareholder in Intermix, VantagePoint did not invest in the company only because of the success of MySpace, but unwittingly shared the success of MySpace. VantagePoint increased investment by 9 times, investing $ 15 million and receiving $ 139 million.
So, what about the founders, Tom, Chris, and the ResponseBase team?
Despite the unusual ownership structure for a startup (MySpace was an Intermix asset), the ResponseBase team was given the option to purchase 1/3 MySpace from Intermix for $ 50,000. Chris and Tom participated in this “round”, and, considering various bonuses and options, suffice it to say that both became multimillionaires.
Considering the two major web 2.0 success (by the number of registered users) - Skype and MySpace, it is interesting to note that each of them won during the launch, largely due to the developed partnership with distribution channels. Skype began distribution with Kazaa. Since the founders of Skype also founded Kazaa, they had an easy way to get Skype on track by advertising Kazaa’s Kazaa network and Kazaa desktop clients. Despite the fact that Skype and MySpace are inherently “viral” products, they may not have become so widespread in such a short period of time without an initial impulse, thanks to well-established distribution channels.
Source: https://habr.com/ru/post/30846/
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