What kind of research might have helped MySpace continue to compete after Facebook started taking over? What sorts of external factors might they have looked at? Support your response and be sure to discuss with others.
As a second question to discuss, should De Wolfe and Anderson have given up so much equity (66%) in the beginning to e Universe? What were the pros and cons of this? Was there an alternative strategy available? If so, what was it? Support your response.
MySpace should have realized that building their client based from a music-based perspective, lead to a confusion for the users. The foundations of MySpace were to introduce and build upon the idea of social networking, but the large initial user base were made up of musicians, bands, recording artists, etc. This causes many users to be confused when first interacting with MySpace (because the user did not know the purpose of MySpace). The company should have started off with marketing towards a broader user base, to help the users understand that the site is a social networking site. Facebook on the other hand was introduced primarily as a social networking site, which was first introduced to college students. This made it simple, and help created a strong user base that knew that the primary purpose of the site was to interact with friends. Another essential point is that Facebook created a platform that enabled developers (outside of the company) to create content, whereas MySpace had developed all their ideas internally (within the company), and had to follow longer procedures in order to get an idea to the development phase (after acquisitions).
Some external factors that MySpace should have focused on trends and a shifting consumer base. For example, competitors like Facebook highly emphasized no advertisements to prevent users from pestering advertisements. MySpace did not try to reduce advertisements, but instead the company increased the number of advertisements on their site. In addition, MySpace failed to notice the change in consumer base over the years, leading the company to become more irrelevant as compared to competitors. The company had formed a high dense consumer base of musicians in the earlier days of the company, and had not reached the more technologically adept consumer base (younger people – college students). With the additions of the platform the company was able to create a broad social networking site, but it took the company too long, because other companies were already emerging in the social networking market.
In my opinion, DeWolfe and Anderson made a bad decision of giving up 66% equity of the company in its early days. This restrained the founders from creating the site that they envisioned. After the acquisitions, the founders barely had any control or authority to their own company. Each process took a substantial amount of time due to the procedural steps incorporated by the new parent company. Although, the company was largely impacted due to the early sell-off of equity, there were some benefits. Such as, the company receiving large portions of capital in order to develop the site, and having less liabilities, if there is a lawsuit against the company in the coming years. Also, the company would gain resources from eUniverse, which was a parent company for several technology-based company at the time. In addition, the decision may have been rational due to the time the deal was made, meaning that the Internet was not as developed as it is now or even five years ago, when the deal was made. Therefore, it would have been more difficult for the founders to get deals with potential investors, because there was more risk due to to the uncertainty of its success.
I would have proposed that the founders had gotten a loan, or a lower investment for a lower equity. Enough amount of money to help start-up the business, and build the platform. After creating the platform, the company should have let outside developers to create new applications that could be integrating into the site. This would have saved the company money, and equity in the long run. Since MySpace focused on developing the all the platforms and application in the company, there was more difficulty to operate without large sums of capital. This method may work, but the one thing that I believe MySpace did wrong was the launch of the company’s site. The site launched when the Internet was not necessarily available to a good portion of people, which led to the company’s strategy of going towards musicians and entertainers. If the company had waited to launch the company would have encompassed more groups on the social spectrum, and create a social networking site that helped connect everyone, rather than having a focus on developing the platform around a specific group. It may have been better to wait a bit to let the market develop rather than rushing in, without truly understanding how long it will take for the market to develop
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