You say goodbye, I say Bebo
From MySpace to Friends Reunited, why do so many media giants fail completely when they buy up social media companies? Media Native’s David Brennan has done his homework and now has the answer…
I noted with interest the story last week that one of the founders of Bebo (remember that particular torchbearer for the new social web?) has bought back the company they sold to AOL for $850 million just five years ago for a bargain basement $1 million.
This completes a trinity of failed purchases of social media companies by traditional media organisations (News Corp’s failed takeover of MySpace; ITV’s £150million loss on Friends Reunited in just four years).
What is it about established media behemoths and social media? (And, yes, I know that AOL could be classified as part of the new wave…but not really!).
Why do these marriages made in heaven – as all were proclaimed at the time – end in such bitter divorce, when broadcast and online media work so well together in most other contexts? Reading the reports of all three corporate misadventures, it appears three themes emerge to explain the pattern;
1. The loss of the strategic focus and dynamism of the founders. I have two friends who have created a valuable fashion brand, sold it, bought it back and sold it again. Only they were capable of making it work because they were the brand. I struggle to see how the same reliance on a few individuals could create such a difference between success and failure in a social media business, but this has been cited as a contributing factor in all three cases.
2. The inability of the established media organisations taking over these businesses to understand the market in which they were operating. For example, Newscorp failed to understand the difference between Facebook’s user base and that of MySpace, which was less valuable to advertisers and already beginning to suffer from problems relating to anonymity, spamming and an often febrile environment.
3. The relentless rise of Facebook, which overwhelmed these niche competitor brands and ultimately squeezed out the available space for them to thrive.
I think there is another theme which contributed far more to the underperformance of these significant media investments, totalling more than $2 billion in value and with expectations so much higher.
How many times have you heard something along the lines of “if Facebook were a country, it would be USA/Brazil/India/most of China by now”? Complete and utter bollocks, obviously, but it gave the impression that these millions of users were inhabitants of a parallel world, and their loyalty, or at least their continued ‘residence’, was pretty much assumed.
All the talk was of growth, not keeping the current user base in place. Well, just look what happened.
At one point, MySpace was losing 10 million users a month and lost almost half of its user base in just one year. Bebo, the predicted winner of the MySpace fallout, has lost most of its peak active base of 40 million users.
Friends Reunited still has a healthy user base of 19 million, but it is unsure how many of those are still active, especially since the relaunch into a more niche nostalgia-themed offering.
My point is that none of these users (including Facebook’s) live on these sites; many are just infrequently passing through. So – less like the population of India and more like a very large group of day trippers.
It is a salutary lesson of the fickleness of the online population, as observed by many internet phenomena (Second Life, anyone?), that users can go almost as quickly as they arrive.
I have always thought social media players have been less vulnerable to this fickleness, just on account of the time invested by users in building their profiles and connections. I have certainly always assumed Facebook was more stable than Google in this respect.
However, Google has integrated their search across lots of different dimensions (text, images, AV, maps etc.) increasing the functionality and maintaining their dominance of the search market.
Facebook has also managed so far to maintain the numbers as competitors slide away, although recent reports suggest even they are beginning to lose users in their most valuable markets, including the USA and UK.
Some of Facebook’s sluggish performance in these markets may be due to the inevitable competition emerging from the pack, notably Instagram (which, of course, is now owned by Facebook). More niche services are picking up users at a giddy rate.
However, as a fairly regular Facebook user, I have noticed a pattern of discontent leading to dramatically decreased usage amongst quite a few of my contacts, with advertising intrusiveness, re-designs and privacy concerns top of the list in every case.
Whatever the outcome, it would seem that my confidence in the stickiness of social media communities is becoming less well-placed, and we may find a very different social web in a couple of year’s time. If we do, I sincerely hope that advertisers will find a way to integrate their brands into the experience in a more effective way than has been managed so far.