Facebook v. MySpace
Developing a Successful
Longterm Marketing Strategy
By Andy Tannouri
Winter 2009
Executive Summary
The traditional marketing strategies employed by industries are no longer
relevant to or effective with Gen Y consumers. To effectively market to Gen Y
consumers, industries must adapt to the world of social networking.
Businesses are posed with a significant challenge to penetrate the markets
comprising the users of MySpace and Facebook, two largest social networking
sites in the world. To do so, they must be familiar with the characteristics of these
respective markets. Additionally, they must use new marketing strategies that
make the most of the interactive resources offered by social networking sites like
MySpace and Facebook.
Introduction
Facebook and MySpace are the main competitors dominating the social
networking market. Accordingly, businesses should focus their marketing efforts
on the users of these sites.
The following are brief profiles of MySpace and Facebook.
MySpace
MySpace is a customizable social networking site specializing in its
entertainment applications. Launched in 2004, it has grown to over 100 million
members with over 65 million users in the US. (MySpace, 2010)
News Corp., a publicly traded corporation, acquired MySpace in October 2005.
(MySpace, 2010)
Facebook
Facebook is a social networking site offering simpler, more streamlined services
than MySpace. Since 2008, Facebook’s membership has exploded, swelling to
over 350 million users worldwide, with over 100 million users in the US.
(Facebook, 2010)
Facebook is privately held. Few details are known about its finances. (Facebook,
2010)
Membership Demographic Growth
MySpace
After MySpace was acquired by News Corp., its user base grew exponentially,
eventually peaking in 2007 with nearly 100 million users domestically. At this
point, the size of MySpace’s United States membership was unrivalled by any
other social networking service.
However, since then, MySpace has slowly lost ground. Figures by Quantcast
estimate MySpace’s unique monthly hits by users in the United States has
dropped by nearly half since it peaked in July 2007, experiencing a severe drop
in Q3 2009. (Quantcast, 2010)
Fig. 1: Monthly US MySpace Visitors (Quantcast, 2010)
A study conducted by Compete reports that since January 2007, the average
stay for a visitor to MySpace has dropped from 30 minutes to a mere 10 minutes.
(Prebluda, 2009)
Fig. 2: Average Stay in Minutes Per Visit to MySpace and Facebook
(Prebluda, 2009)
Facebook
Created around the same time as MySpace, Facebook began as an exclusive
social networking service for northeastern universities. Accordingly, its growth
was initially much slower than that of MySpace, hampered by its limited
exposure. However, as Facebook expanded into the global market, it quickly
blew away MySpace’s membership internationally, eventually overtaking
MySpace domestically as well in early 2009. (Facebook, 2010)
Fig. 3: Unique Monthly US Visitors to Facebook and MySpace
(Prebluda, 2009)
Unlike MySpace, Facebook’s membership acquisition has not slowed.
In 2009, Facebook’s US membership increased by 144%, from 42 million to 103
million. The fastest growing were those of higher age brackets, with the 55+ age
bracket increasing 922% from 950,000 to 9.7 million. (Corbett, 2010)
Notably, the only demographic to shrink in 2009 was the number of US students
enrolled in college, which dropped 55% from nearly 8 million to just over 3.5
million. (Corbett, 2010) This may be due to students being alienated by their
parents’ presence on Facebook. (Corbett, 2009)
Niche Markets
Facebook
While Facebook dominates both the domestic and international social networking
markets, its services are geared toward general networking. As these general
services are not tailored for any specific interest, Facebook has yet to develop
any meaningful presence in niche markets. (Nielsen, 2009)
While Proximity clients are primarily interested in marketing to the Gen Y cohort,
the recent explosive growth of older Facebook users introduces the possibility to
use cutting edge social media to market to older generations. However, the value
of such marketing has yet to be examined, as traditional marketing has remained
successful with older generations.
MySpace
In 2009, following an extended period of Facebook’s explosive growth, MySpace
buckled under its financial burdens. In the aftermath, thirty percent of MySpace’s
employees left or were laid off, including its founder, Chris DeWolf, and his
executive management team. (Garrahan, 2009)
DeWolf was replaced by Owen Van Natta, who has since attempted to steer
MySpace in a different direction. Van Natta says MySpace is no longer interested
in competing with Facebook, and has begun to focus on music, film, and
entertainment, streamlining their site and entertainment services to consolidate
MySpace’s user base. (Garrahan, 2009)
So far, this change has proven successful, attracting over three million viewers to
a live streaming of the film New Moon on the site. (Garrahan, 2009)
MySpace’s new direction has it veering more into the entertainment market, with
its users focusing on sharing and socializing about music, film, and television.
Marketers should be mindful of this trend as MySpace continues to develop.
Revenue Models
MySpace
MySpace had two major sources of revenue:

MySpace generates income from advertisment revenue.

In 2007, MySpace signed an exclusive deal with Google generating a
sizable proportion of the former’s revenue. 2009, Rupert Murdoch, CEO of
MySpace’s parent company, News Corp., announced that MySpace had
not generated enough ad traffic in 2009 for the deal to be renewed.
Since MySpace’s deal with Google was not renewed, MySpace has undergone
major restructuring. The financial implications of the recent changes have yet to
be determined.
Despite its ad revenue and corporate sponsors, MySpace has yet to turn cash
flow positive. (Garrahan, 2009)
Facebook
In Q3 2009, Mark Zuckerberg, Facebook’s founder and CEO, announced that
Facebook had become cash flow positive, several months ahead of schedule.
Factors that contributed to this include:

Facebook generates income from advertisement revenue.

Developments increasing efficiency and decreasing costs, such as the
launch of Haystack, a new tool that cuts storage costs for the billions of
photos uploaded to Facebook

Facebook generates income from the virtual gift shop where users
purchase digital property
Despite Facebook’s prospective financial success, Nigel Gwilliam of the Institute
of Practitioners in Advertisers says, “Many consider the real value of websites
like Facebook lies not in advertising but in engagement and participation. But no
one has cracked the business model for this yet.” (Clark, 2009)
Marketers have begun to take note of this trend, many of whom have created
Facebook profiles and fan pages with which users may interact. This word-ofmouth method may prove to be the next successful evolution in marketing.
Future Development
After 2009’s developments, MySpace’s future remains uncertain. However, being
that it still claims 100 million users, MySpace remains fertile ground for marketers
to reach potential consumers. Marketers planning to tap MySpace’s user base
should be mindful of the latter’s growing focus on entertainment media.
Facebook has grown steadily through 2009, hinting that its exponential levels of
growth may continue for an indefinite period of time. Its continually developing
software platform opens several interactive marketing possibilities for industries
willing to experiment with non-traditional advertising. Additionally, Facebook’s
expanding demographic gives industries a new window to market to older
generations of consumers.
Recommendations
Marketers have yet to effectively tap the users of social networks. To succeed,
they should mind the following:

Facebook and MySpace continually develop new tools to which their users
relate such as Facebook’s gift shop. Marketers should take advantage of
these tools to gain the attention of Gen Y social networking users.

MySpace is shifting its focus to entertainment media. Marketers in these
industries should target relevant MySpace communities for maximum
impact.

Facebook’s older user demographics are growing at a phenomenal rate.
Industries targeting older generations should gain a presence on
Facebook as an alternate means to advertise to these generations.

Gen Y does not respond to traditional advertising as older generations did.
Marketers must take a humbler, more interactive approach to brand and
product advertisement to relate to Gen Y consumers.
Attachment 1: Terms Associated With Advertising
(Nielsen 2009)
Attachment 2: Facebook Demographic Growth in 2009
(Corbett, 2010)
References
Clark, N. (2009 Sep. 16). Facebook heads towards profit. The Independent.
Retrieved Jan. 22, 2010 from
http://www.independent.co.uk/news/business/news/facebook-heads-towardsprofit-1788430.html
Corbett, P. (2010 Jan. 4). Facebook Demographics and Statistics Report 2010 –
145% Growth in 1 Year. IStrategyLabs. Retrieved Jan. 22, 2010 from
http://www.istrategylabs.com/2010/01/
Corbett, P. (2009, Jul. 6). 2009 Facebook Demographics and Statistics Report:
513% Growth in 55+ Year Old Users. College & High School Drop 20%.
IStrategyLabs. Retrieved Jan. 22, 2010 from
http://www.istrategylabs.com/2009/07/2009-facebook-demographics-andstatistics-report-513-growth-in-55-year-old-users-college-high-school-drop-20/
Facebook. (2010 Jan). Press Room. Retrieved Jan. 20, 2010 from
http://www.facebook.com/press/info.php?statistics
Garrahan, M. (2009 Dec. 4). The rise and fall of MySpace. Financial Times.
Retrieved Jan. 23, 2010 from http://www.ft.com/cms/s/2/fd9ffd9c-dee5-11de-adff00144feab49a.html
MySpace. (2010 Jan). Fact Sheet. Retrieved Jan 20, 2010 from
http://www.myspace.com/pressroom?url=/fact+sheet/
Nielsen. (2009 Mar.). Global Faces and Networked Places: A Nielsen report on
Social Networking’s New Global Footprint. Retrieved Jan 22, 2010 from
http://serveruk.imrworldwide.com/pdcimages/Global_Faces_and_Networked_PlacesA_Nielsen_Report_on_Social_Networkings_New_Global_Footprint.pdf
Prebluda, A. (2009 Feb 26). Facebook vs. MySpace: Tale of the Tape. Compete,
Inc. Retrieved Jan 21, 2010 from http://blog.compete.com/2009/02/26/facebookmyspace/
Quantcast. (2010 Jan). MySpace.com Monthly Traffic. Retrieved Jan. 22, 2010
from http://www.quantcast.com/myspace.com