The Rise and Fall of Myspace

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In 2006, the most visited website in America was Myspace. It wasn't Yahoo, it wasn't eBay, not even Google. But just five years later, News Corp sold Myspace for $35 million, a fraction of the $580 million it had paid for it. So how does one of the biggest websites in the world become irrelevant that fast? There are three huge reasons Myspace disappeared and none of them were Facebook. But it was these three mistakes that opened the door for Facebook to take over. But we need to back up here for a second because if you're under a certain age or over a certain age as in my case, the name Myspace might not mean much to you. Back in the early 2000s, it was the place to show people who you were online. You could customize your page, post pictures, write blog posts, and even choose a song that automatically played on your profile. And then there was the infamous top eight. These were the coveted eight spots on your profile where you told the world who your closest friends were. Music was also a huge part of Myspace. And many of the artists you know today were discovered on that platform. After launching in 2003, this online community quickly became one of the hottest properties on the Internet. So much so that Rupert Murdoch's News Corp bought Myspace in 2005 for $580 million.

And by the end of 2006, they had over 100 million accounts. Pretty much looked unstoppable. But behind the scenes, they were making decisions that would make it really easy for a competitor, like Facebook, to eat their lunch. The first mistake was, they put revenue ahead of the customer. When News Corp acquired Myspace in 2005, it had something every business wanted—attention. There was a lot of money to be made by putting ads in front of that massive audience. Google agreed to pay them at least $900 million over the next couple of years to put its search and ads across the platform. That meant that Myspace had more ads, more clutter, slower pages, and over time, the things that people loved about the site started taking a backseat to monetizing all that attention. That's the trap a lot of businesses have to watch out for. Myspace needed to make money. Every business does, but it shouldn't be at the expense of the customer experience. It comes down to the EntreLeadership principle that we call Marketplace Service. We believe that if you help enough people, you don't have to worry about the money. Rabbi Daniel Lapin says that when you serve your customers well, they will give you certificates of appreciation with president's faces on them.

The more value you create for people, the more of those certificates you're going to earn. So making money is a good thing. But if you start to worry about the money more than the people you're serving, you've got to order backwards. So it's good to ask yourself, what are we asking our customers to deal with because it helps our bottom line? Maybe it's an extra fee or a frustrating policy. Maybe it's a slow process nobody's bothered to fix because that's just how we do it, whatever it is.

Don't assume your customers will put up with it forever. If you want customers to keep coming back and keep paying you, you have to keep giving them an experience worth coming back for. That's where Myspace messed up. Because while they were sacrificing the customer experience for ad revenue, Facebook was busy making its product much better. And that leads us to mistake number two. They stopped trying to build a better product. Remember, Myspace had every advantage. They had the users, they had the brand recognition, the money, the momentum. But having a head start only matters if you keep moving. And former Myspace leaders said the team had less freedom to experiment because changes could hurt page views and cost them advertising dollars. So even when the user experience needed work, they were told to protect the traffic they already had above all else. And one of the things that made them so popular in the first place, the customization started to work against them. Giving users so much freedom to design their own pages made things feel personal and creative, but it also contributed to clutter and slow pages and overall just a messy experience. Meanwhile, Facebook's engineers were constantly improving their site. Instead of letting every user design the experience, Facebook gave everyone a cleaner, more consistent profile. And they kept rolling out features that made connecting with other people easier. So while Myspace was trying to protect what it already had, Facebook was busy building something better. And little by little, that consistency started winning. By 2008, Facebook had overtaken Myspace globally. And when Myspace finally realized how serious the threat was, it was too late. There's a powerful temptation to protect what's already working. When you're the top dog, it's easy to think, why mess with a good thing? You get comfortable doing things the way you've always done them. But when you're the underdog, you experiment. You look for a better way.