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MySpace Story : A Lesson For All

Posted: 09.12.2011 04:06:00  | Category: IN GENERAL  | Tags: Case - Failure

Not too long ago, in 2005, MySpace was sold to News Corp for $580m. A few years later, in 2007, MySpace was a giant with over 100 million users and a market value of $12bn. 6 years later, just a couple months ago, News Corp sold MySpace for $35m. I can't keep myself wondering how and what actually led this giant to such a failure, what was the story behind this failure?

A simple answer can be harsh competition was lost against a new giant : Facebook. I find this answer as too simple and obvious. In this article, I will try to go deeper and try to analyse the pitfalls MySpace has fallen.

Financial Freedom

Let us put one fact straight/in front of us, even though Facebook started just a year after MySpace, MySpace managed to successfully lead the market for a considerable amount of time. So, everything was going well in MySpace for some time.

Here is a good graph which shows the launch dates for most of social networking sites:



As we can see from this timeline, MySpace, Linkedin and Hi5 was launched in 2003, Facebook in 2004 and Twitter in 2006. Let us also keep in mind that the MySpace sale was on 2005.

Here is another chart which shows how the competition has evolved between the major players over the years.



My opinion is that MySpace not only lost its economic freedom. They also became "professional" too early in its lifetime, whereas Facebook remained amateur and protected its economic freedom most of the time. What I mean by being "professional" is that by selling the majority of its shares to News Corp, they also sold their amateur and entreprenaur soul. �No need to say how business is run in large companies, the result is apparent.

Technical Incapabilities

Having lost its economic freedom, and may be its soul, hard times was ahead for MySpace. We would at least expect excellent engineering and creative skills during this time but MySpace had serious difficulties in delivering new content and maintaining the scalability for such a large user base. During these times MySpace was often criticized for poor performance.

MySpace started out as a two-tier system, ColdFusion on the front-end, and SQL Server at the back-end. �And the whole site design was so strict that it was too hard to play with it. This was what made the real difference between Facebook and MySpace. While Facebook and others were running or even sprinting, MySpace was thinking if it should start walking. The moment they realized they needed a change it was too late. The infrastructure they had wasn�t set up to scale over 100 million users, it was though to change it. They didn�t have the programming talent to make huge changes and it was even tougher to hire great entrepreneurial programmers who could rebuild the entire site.

Some people put the blame on Microsoft. May be they are right, at that time Microsoft was not so good with scalability and load balancing features. But what was worse MySpace was running over ColdFusion. MySpace�s failure also became the failure of ColdFusion.

Despite the difficulties, they were able to add a middle tier and they got rid of ColdFusion and replaced it with ASP.NET while upgrading to SQL Server 2005, Standart Edition and a few instances of Enterprise edition..

As of 2009, MySpace was using the Microsoft Application Platform to support:
  • Total data managed by SQL Server was 1 petabyte, consisting of
    • 827 billion rows of data
    • 8 billion friend relationships
    • 27 billion comments
    • 34.2 billion e-mails total
    • 41 million new e-mails added per day
    • 33 million video files
    • 62,000 new videos uploaded per day
  • 440 SQL Server instances
  • 130million monthly active useres
  • 300.000 new users per day
  • 4.4million concurrent users at peak times
Check out Microsoft Case Study of MySpace for further details
Here is another useful link on technical details : MySpace Architecture

Effects of User Base and lack of creativity

Of course the user base is another important factor besides economic freedom and technical capabilities, after all it is the users who make the final decision. Here are some 2009 figures about the user bases of both sites :



Facebook user base is more literate and has better income, therefore more computer literate and demanding. So it is not only MySpace�s fault that they realized too late that content and innovation mattered.

MySpace was providing blogging services which led to some censorship problems. Here is a 2006 article about blog censorship, Get out of MySpace, bloggers rage at Murdoch

And here are some complaints users posted about MySpace: Consumer Complaints about MySpace

Summary

This is a lesson for all of us, investors, entrepreneurs, manager, directors, system architects, designers and programmers. I leave it to you to get the lessons for your part.

But one final thing I wish to emphasize is, no giant is unbeatable, there is always a new oppurtunity even if all corners are occupied. So, watch out for new developments in the years to come...