MySpace, Facebook Get Serious About Asia

The social networking majors are aggressively pursuing the region's growing online audience, as earlier arrivals Friendster and Orkut defend their turf

by Olga Kharif and Nandini Lakshman

A year ago, Shruti Narayan, a 13-year-old who lives in India, began using Google's (GOOG) social networking site, Orkut, to keep tabs on schoolmates. But a few months ago, Narayan made the jump to Facebook because "it has more features and interaction like quizzes and TV shows," she says.

Narayan's network-hopping reflects the colossal scrum among the world's biggest social networks for the hearts and mouse clicks of millions of people in India, China, and elsewhere in Asia. The landgrab has taken on added urgency lately, as leading social networks MySpace and Facebook converge on the region to battle established homegrown networks and foreign sites, especially Orkut and Friendster.

'Financially Intriguing' Market

Until recently, countries such as China and India held scant interest for the U.S.'s social networking heavyweights thanks to low rates of Internet usage and a dearth of advertiser dollars. Facebook and News Corp.'s (NWS) MySpace instead concentrated on the U.S., which according to eMarketer accounts for 73% of social networking's worldwide revenue of $1.23 billion. They left Asia to U.S. laggards Friendster and Orkut, and to local sites such as CyWorld. Of Orkut's 25.2 million active users, about 43% are in the Asia Pacific region, according to Web traffic tracker comScore (SCOR). Friendster has become the largest social network in the region, according to comScore, with 35 million Asia Pacific users, out of 50 million worldwide.

That dominance is now under threat, just as the Asia Pacific market starts to bloom. In China, 230 million people are using the Internet, more than in the U.S., according to consultancy IDC. "Imagine that all these markets, over the next five years, double their penetration," says Karsten Weide, an analyst with IDC. "Then, for the future, the most important market is Asia Pacific. Once it develops more, it's going to become financially more intriguing than the U.S."

Especially when it comes to advertisers. A recent Synovate AsiaBUS study, commissioned by Microsoft (MSFT), found that social networks in Asia Pacific attract the coveted 15- to 34-year-old demographic and that about 15% of the region's users are top managers and business owners. "Each and every month, more and more advertisers are coming to us and paying us more money," says David Jones, Friendster's vice-president of marketing. Like other social networking sites, Friendster doesn't disclose revenue figures.

MySpace in Asia: For Locals, By Locals

Now MySpace and Facebook want in on the action. Already available in 20 countries, MySpace is pouring more funding into ventures in Asia Pacific than anywhere else in the world this year. Last November, MySpace launched a Japanese site. It was the first MySpace site to be especially adapted to local interests and culture and supported by a full, local engineering team. The site prominently features videos and manga related to singers popular in Japan. It also focuses on blogging via cell phones, or microblogging.

In China, MySpace launched a separate, local site this spring. To enhance performance, MySpace began hosting the site locally in September. "Those little, subtle things, if you don't get right—people are not going to like your site," says Travis Katz, senior vice-president and general manager of International MySpace.com. "When we localize our sites, we see a huge surge in growth."