MySpace: Unstoppable Force or Unnecessary Click Factory?
So I just read the big article about MySpace in today’s New York Times and it got me thinking a lot about growth, monetization, and user experience. People always talk so much about how many pages MySpace serves up and how that represents such dramatic growth.
After playing with the thing for a few weeks and writing a hugely ridiculous article on customizing it, one thing has really stuck out to me: there are a tremendous amount of extraneous page views being generated at that place. It’s a factory of unnecessary clicks.
That’s right. I hold that at least 2/3rds of page views would disappear. Here’s what I mean. This would be the flow in a, say, Google-engineered network experience:
1. Click over to “GoogSpace”, or whatever we want to call it. (+1 page view)2. Click through to read and reply to all mail (0)3. Visit a few friends’ pages (+3)4. Edit my profile page (+1)
That’s about 5 registered page views. The rest of the interaction comes from XML/HTTP requests.
Here’s the same sequence on MySpace:
1. Click over to MySpace. (+1 page view)2. Log in, because MySpace doesn’t remember logins very well. (+2)3. Click through to read and reply to all mail… about three per mail. (+21)4. Visit a few friends’ pages. (+3)5. Reload a few pages because of server errors. (+3)5. Edit my profile page. (+10)
That’s about 40 registered page views… and it’s not an atypical pattern at all, from what I’ve found. Many people have also mentioned that web-based IM generates a ton of clicks for them as well.
So what’s my point? Well, first and foremost, the “cost” of running a web site that maximizes interaction and yet sacrifices page views in the name of user experience can be staggeringly high. If any layperson or out-of-touch analyst looked at the second graph above out of the blue, they’d think MySpace had run into something awful. And I only chopped the page views by 2/3rds. It could be a lot more.
Now, ordinarily you’d look at this as a very bad thing for MySpace. Essentially generating extremely “low quality” page views left and right. But the New York Times article said MySpace’s pages were selling for a paltry $.10 CPM. Ten cents! That means I could buy 5 million page views for $500 on the second-most popular site on the internet! As forensic expert and O.J. Simpson defense witness Henry Lee once said: “Something wrong here.”
In addition to the low CPM, MySpace ad inventory is apparently not selling out, which means they could perhaps deal with some page view shrinkage at this time. The problem, however, is that less page views does not mean automatically higher CPMs. It does when people are beating down your door and you’re oversold all over the place, but not when you’re lowering prices just to keep ads populated around the site.
So hypothetically, if MySpace went from 30 billion page views a month to 10 billion page views a month overnight due to some much needed site modernization, what would the consequences be? On the product side, it would be unquestionably positive. Better user experience equals much greater user happiness and stickiness. On the economic side though, it’s a little less clear.
There are three conditions a site can be in: undersold, sold out, or oversold.
Let’s take the undersold situation; the situation MySpace is currently in. According to the NYT article, they are doing about 30 billion page views per month and are not sold out. Let’s just say that hypothetically they are *close* to sold out and they have about two ads per page… so maybe 50 billion ad impressions per month. At a $.10 CPM, that’s $5 million. But we know that the average CPM on MySpace is probably higher and we know that they will take in about $200 million this year (or $16.6 million per month), so that’s about an average CPM of about $.33 (at this point, we’re in conjecture mode). So given our new inventory of only 20 billion page views a month, after user experience optimizations, that’s $6.6 million a month. But since there are so many less impressions available now, can they charge a bit more than $.33 CPM? Probably. Bump that up to a dollar and you’re already ahead of where you were, revenue-wise, before you optimized.
(Edit: I just re-read the article and 10 cents is not the bottom price but rather the average price, so if MySpace is bringing in $16.6 million a month, that means they are selling 166 billion ad impressions a month… which they don’t have. So let’s say they have 50 billion ad impressions to sell at $.10 CPM. That’s only $5 million. Either a ton of MySpace’s revenue is *not* coming from CPM ads (entirely possible), or I am seriously forgetting how to do math.)
Now, the scenario above is only true if you’re in the situation MySpace is in, unfortunately. Way more page views than you know what to do with and massively undersold from a price/quantity standpoint. Take any of their competitors, or really any company who is earning decent CPMs and doing ok on ad inventory, and you could almost never dream of eliminating a ton of your page views. This is a dilemma companies face every day when deciding if and when to replace precious but inefficient page refreshes with more user-friendly Ajax calls.
So where am I going with all of this? Well, I hold that MySpace is in a unique position right now because of the numbers they are putting up combined with the fact that they are now owned by an $18 billion company, and the absolute best thing they can do right now is reduce their inventory by reducing their page views. Or at least reduce them “per action” on the site and continue to grow their user base. The founders have already had their big liquidity event so there’s certainly no need to create artificial page views to make yourself look better to suitors anymore.
As for additional streams of revenue and monetizing MySpace further, I’d drop the hope that companies will purchase pages that users will want to “friend” and concentrate on more on turning each and every kid into a walking product endorser. In fact, if I wasn’t running Newsvine right now, that’s the business I’d be in.
I know everyone says MySpace is this unstoppable force that will always be as popular as it is right now, but if I’m them, I’m more paranoid than that. The only company I know of that can stay consistently a step and a half ahead of pop culture is Apple, and even *they* do it to a large extent with user experience.
If you believe Malcolm Gladwell’s principles from The Tipping Point, you believe that all it takes is the right group of 50 influential kids in New York City to start using another social networking service and the pendulum will begin to swing. That’s what people like Fred Krueger and Ted Leonsis think, and although I’m not sure whether or not they’ll be the ones to do it, I certainly believe in the fragility of it all.
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After playing with the thing for a few weeks and writing a hugely ridiculous article on customizing it, one thing has really stuck out to me: there are a tremendous amount of extraneous page views being generated at that place. It’s a factory of unnecessary clicks.
That’s right. I hold that at least 2/3rds of page views would disappear. Here’s what I mean. This would be the flow in a, say, Google-engineered network experience:
1. Click over to “GoogSpace”, or whatever we want to call it. (+1 page view)2. Click through to read and reply to all mail (0)3. Visit a few friends’ pages (+3)4. Edit my profile page (+1)
That’s about 5 registered page views. The rest of the interaction comes from XML/HTTP requests.
Here’s the same sequence on MySpace:
1. Click over to MySpace. (+1 page view)2. Log in, because MySpace doesn’t remember logins very well. (+2)3. Click through to read and reply to all mail… about three per mail. (+21)4. Visit a few friends’ pages. (+3)5. Reload a few pages because of server errors. (+3)5. Edit my profile page. (+10)
That’s about 40 registered page views… and it’s not an atypical pattern at all, from what I’ve found. Many people have also mentioned that web-based IM generates a ton of clicks for them as well.
So what’s my point? Well, first and foremost, the “cost” of running a web site that maximizes interaction and yet sacrifices page views in the name of user experience can be staggeringly high. If any layperson or out-of-touch analyst looked at the second graph above out of the blue, they’d think MySpace had run into something awful. And I only chopped the page views by 2/3rds. It could be a lot more.
Now, ordinarily you’d look at this as a very bad thing for MySpace. Essentially generating extremely “low quality” page views left and right. But the New York Times article said MySpace’s pages were selling for a paltry $.10 CPM. Ten cents! That means I could buy 5 million page views for $500 on the second-most popular site on the internet! As forensic expert and O.J. Simpson defense witness Henry Lee once said: “Something wrong here.”
In addition to the low CPM, MySpace ad inventory is apparently not selling out, which means they could perhaps deal with some page view shrinkage at this time. The problem, however, is that less page views does not mean automatically higher CPMs. It does when people are beating down your door and you’re oversold all over the place, but not when you’re lowering prices just to keep ads populated around the site.
So hypothetically, if MySpace went from 30 billion page views a month to 10 billion page views a month overnight due to some much needed site modernization, what would the consequences be? On the product side, it would be unquestionably positive. Better user experience equals much greater user happiness and stickiness. On the economic side though, it’s a little less clear.
There are three conditions a site can be in: undersold, sold out, or oversold.
Let’s take the undersold situation; the situation MySpace is currently in. According to the NYT article, they are doing about 30 billion page views per month and are not sold out. Let’s just say that hypothetically they are *close* to sold out and they have about two ads per page… so maybe 50 billion ad impressions per month. At a $.10 CPM, that’s $5 million. But we know that the average CPM on MySpace is probably higher and we know that they will take in about $200 million this year (or $16.6 million per month), so that’s about an average CPM of about $.33 (at this point, we’re in conjecture mode). So given our new inventory of only 20 billion page views a month, after user experience optimizations, that’s $6.6 million a month. But since there are so many less impressions available now, can they charge a bit more than $.33 CPM? Probably. Bump that up to a dollar and you’re already ahead of where you were, revenue-wise, before you optimized.
(Edit: I just re-read the article and 10 cents is not the bottom price but rather the average price, so if MySpace is bringing in $16.6 million a month, that means they are selling 166 billion ad impressions a month… which they don’t have. So let’s say they have 50 billion ad impressions to sell at $.10 CPM. That’s only $5 million. Either a ton of MySpace’s revenue is *not* coming from CPM ads (entirely possible), or I am seriously forgetting how to do math.)
Now, the scenario above is only true if you’re in the situation MySpace is in, unfortunately. Way more page views than you know what to do with and massively undersold from a price/quantity standpoint. Take any of their competitors, or really any company who is earning decent CPMs and doing ok on ad inventory, and you could almost never dream of eliminating a ton of your page views. This is a dilemma companies face every day when deciding if and when to replace precious but inefficient page refreshes with more user-friendly Ajax calls.
So where am I going with all of this? Well, I hold that MySpace is in a unique position right now because of the numbers they are putting up combined with the fact that they are now owned by an $18 billion company, and the absolute best thing they can do right now is reduce their inventory by reducing their page views. Or at least reduce them “per action” on the site and continue to grow their user base. The founders have already had their big liquidity event so there’s certainly no need to create artificial page views to make yourself look better to suitors anymore.
As for additional streams of revenue and monetizing MySpace further, I’d drop the hope that companies will purchase pages that users will want to “friend” and concentrate on more on turning each and every kid into a walking product endorser. In fact, if I wasn’t running Newsvine right now, that’s the business I’d be in.
I know everyone says MySpace is this unstoppable force that will always be as popular as it is right now, but if I’m them, I’m more paranoid than that. The only company I know of that can stay consistently a step and a half ahead of pop culture is Apple, and even *they* do it to a large extent with user experience.
If you believe Malcolm Gladwell’s principles from The Tipping Point, you believe that all it takes is the right group of 50 influential kids in New York City to start using another social networking service and the pendulum will begin to swing. That’s what people like Fred Krueger and Ted Leonsis think, and although I’m not sure whether or not they’ll be the ones to do it, I certainly believe in the fragility of it all.
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