Already a Bloomberg.com user?
Sign in with the same account.
It was late to the social-networking party in Europe, but the News Corp. site quickly overtook rivals with features designed for, and by, locals
A year is an eternity in Web 2.0 time. Just 12 months ago, social-networking site MySpace looked late to the party in Europe, as local alternatives and American rivals such as Facebook, Bebo, and Ringo (MNST) got off to a fast start in the nascent market.
But the News Corp. (NWS) unit was far from giving up. First in Britain, then sweeping across the Continent, MySpace rolled out a series of country-specific sites retooled in different languages and with added features designed to appeal to the locals (see BusinessWeek.com, 9/11/06, "MySpace: No Free Ride in Europe").
The campaign has been remarkably successful. The number of unique visitors to MySpace's European sites has risen more than 72% in the past year, to 26 million per month, according to researcher comScore. Traffic has grown even faster: Europeans viewed 2.5 billion MySpace pages in May (the most recent month for which figures are available), compared with 1.1 billion a year earlier, says market tracker Nielsen//NetRatings.
Growing Pains in China
MySpace is now the clear No. 1 social-networking site in every European country where it has created a local presence. In fact, Nielsen//NetRatings says its "active reach," or the percentage of the population that visits MySpace, is anywhere from 10 to 15 times higher in Spain, France, and Germany than for runner-up Facebook. Only in Britain is the contest closer, with MySpace leading rivals by around two-to-one in terms of reach.
That's something of a contrast to the growing pains MySpace is encountering in China, where a local site rolled out in April is struggling to gain traction (see BusinessWeek.com, 06/26/07, "MySpace's Slow Start in China") The difference likely comes down to how much MySpace has customized its sites in each European country—something critics say it hasn't done enough of yet in China.
"Our focus has not been to import the American model, but to hire people in each country and let them shape MySpace to fit the local culture," says Travis Katz, the company's senior vice-president for international expansion. "We're seeing a flourishing of local activity from local markets, rather than a repetition of things that worked in the U.S."
Hip-Hop Community, Teutonic Style
In fact, some of the innovations cooked up by MySpace teams around Europe have been so popular that they could be imported to the mothership site in the U.S. One is an area called "Boudoir" on MySpace France where designers, fashion writers, and members meet to discuss the latest trends and styles. To add spice, MySpace has enticed big-name celebrities such as Karl Lagerfeld and Kate Moss to join the party. Now, the company plans to bring Boudoir to the U.S. in the hope of tapping into the big pool of fashion advertising there.
Another potential import includes an online street dance community called WhoGotSkillz, started by MySpace Germany. The area features hip-hop music, video, and discussions of cutting-edge choreography. And soon Americans might be able to enjoy an innovation from the British MySpace, an online movie-making contest for first-time directors called MyMovie Mashup. Candidates submitted short films made by mashing up digital material, and MySpace members were given the chance to vote for their favorite. The as-yet-unannounced winner will receive $2 million to make a feature film.
Needless to say, MySpace's rivals aren't sitting still. Bebo, which started in 2004, is still ranked by researcher Hitwise as the largest social networking site in Britain in terms of monthly visits, though MySpace has more users. And despite the success of MySpace over the last year, both Bebo and Facebook are currently gaining ground in Britain. At today's growth rates, says analyst Alex Burmaster of Nielsen//NetRatings, they could catch MySpace by September of this year.
Opening Up to Outside Programmers
In part that's due to their different strategies. Until recently, membership in both Bebo and Facebook was by invitation only, which helped to create stronger communities and inspire more loyalty from users (see BusinessWeek.com, 07/02/07, "MySpace, Facebook: A Tale of Two Cultures"). The self-reinforcing nature of established online communities also works against MySpace. Says Louise Gething, a 22-year-old recent college graduate from Scotland, and Facebook member: "I don't see the point of joining MySpace now because all of my friends are already on Facebook."
Facebook also has recently taken a bold step to open its site to outside programmers, who can now add chunks of software or bits of other Web sites onto Facebook (see BusinessWeek.com, 05/24/07, "Facebook Aims to Socialize All Online Services"). Facebook hopes this open source approach will give it an edge over MySpace, and pundits are optimistic. "The key to success is to become an open platform," says Andy Mullholland, chief technology officer in the London office of infotech consultancy Capgemini. "You just have to look at the success of Microsoft (MSFT) and Google (GOOG) to see the potential."
Now, How to Make Money?
Now the question is whether any of these sites can start to generate profits. Though social networks have seen a rapid growth in Europe, the jury is still out on how they will make money. Many analysts think the most likely source is via advertising. "There's a real opportunity for brands and retailers to look at different ways of engaging with these online communities," says Heather Hopkins, research vice-president for Hitwise.
Hopkins argues most advertisers haven't grasped the opportunity yet, but the picture is starting to change. News Corp. Chief Executive Officer Rupert Murdoch said in February that worldwide advertising sales for MySpace had reached $25 million per month, up 30% from the previous quarter. And researcher eMarketer predicts advertising spending on social networks will soar from $450 million last year to $4.3 billion in 2011.
With its growing arsenal of local-language sites, MySpace looks positioned to ride that curve. Facebook, Bebo, and others are fighting to stay in the game, but for now, MySpace is the social networking site to beat in Europe.