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For MySpace, Making Friends Was Easy. Big Profit Is Tougher.

A ton of discussion is floating around the blogosphere with regards to Saul Hansel's thought-provoking piece in the Times.

Over on the Church of the Customer Blog, Ben has a nice summary and looks at How MySpace saved Chris DeWolfe's marketing soul: Effective direct marketers focus intently on what works and what doesn't through constant testing and adjustment. They launch, measure then adjust. Measure again and adjust. And never stop.

However, not everyone is as impressed.

Many, in fact, are critical of MySpace's numbers and business model. For starters, check out Scott Karp's fantastic piece What If Media 2.0 Is Less Profitable Than Media 1.0?. Quote: But what happens if big company brands realize that they no longer need a media middleman to connect with consumers? Why, for example, does a brand need to set up a page on MySpace in order for MySpace users to link to that brandís online presence? If a brand succeeds in creating compelling and entertaining content that speaks directly to consumers and creates immediate value for them, why not just set that up "for free" on their own site and use the viral power of social networks to spread the word?

Umair thinks Scott is asking the wrong question and suggests that discussions of CPMs are not what this is all about. Quote: Now, the MySpace example is also flawed. Scott is using CPM to value MySpace. MySpace's success is predicated on shifting the industry away from the flawed assumptions and logic of CPM, much like Google has done. MySpace's challenge is to do the same thing for branding - to create a hyperefficient form of interaction, much like it's already done with sponsored profiles.

Techdirt takes issue with MySpace's traffic: Inflated MySpace Page Views Explain 10-Cent CPMs. A previous article along the same lines is here.

Mike Davidson does an excellent job at looking at the site's traffic and usability in his great post, Unstoppable Force or Unnecessary Click Factory? Here Mike's the "before" and "after" graphs of MySpace's traffic, if they were not generating so many unnecessary clicks:

Image Hosted by ImageShack.us

Image Hosted by ImageShack.us

Link to the NYT article and quote:
MySpace now displays more pages each month than any other Web site except Yahoo. More pages, of course, means more room for ads. And, in theory, those ads can be narrowly focused on each member's personal passions, which they conveniently display on their profiles. As an added bonus for advertisers, the music, photos and video clips that members place on their profiles constitutes a real-time barometer of what is hot.

For now, MySpace is charging bargain-basement rates to attract enough advertisers for the nearly one billion pages it displays each day. The company will have revenue of about $200 million this year, estimated Richard Greenfield of Pali Capital, a brokerage firm in New York. That is less than one-twentieth of Yahoo's revenue.


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