Platform mediated networks are overtaking the way business is done. In this blog and in our video, we want to elaborate on why Facebook has become the winner that took it all in comparison with a comparable platform, Myspace.
Myspace was founded in 2003, before Facebook even existed. It is, at first sight, a very similar platform as Facebook. People can subscribe and they have their own page and can connect with each other. Myspace was very popular and the company News Corporation purchased Myspace. Professional managers were assigned to develop a strategy for Myspace and lead the platform to more growth.
In the meantime, five Harvard students were thinking of the same kind of platform and Facebook was born. How come that Facebook eventually took over the market and Myspace failed to do so?
On first sight, Facebook and Myspace look like they are quite alike. They are both platform-mediated networks where advertisers and users are connected. Users can benefit from their free subscription and the advertisers are happy as long as the number of users is growing. Network effects have the chance to create a lot of value.
However, there are many differences between the platforms. The three main differences are the newsfeed, the use of real names versus nicknames and the customization of the newsfeed. The newsfeed of Facebook is interactive; you can see the updates of your friends immediately. On Myspace, you have to visit your friend’s page to see their posts and update. Next to that Facebook uses a layout that you cannot change, only your profile picture. Myspace offered users the freedom to customize their page, all fonts, backgrounds, and HTML included.
On a more business perspective, the both platforms differ significantly. Facebook followed the market needs and Myspace was managed in a stricter way, with strategy plans and set rules and goals. Next to that an important point was the introduction of mobile technology. Myspace was rather slow with launching a mobile app, while Facebook already introduced a mobile app a year earlier. Facebook kept a close eye on the trends and moved fast when apple introduced the iPhones. The result was that Facebook got a lot of subscriptions through mobile technology and Myspace was running behind.
Finally, both platforms have different privacy settings, on Facebook, everything is private at first and you can make it public, and Myspace is the other way around, you get encouraged to connect with people you don’t know. Facebook had a more positive reputation on the privacy topic, and users trusted the platform more. Eventually, Facebook created a better name for themselves, and the number of users kept growing. Increasing popularity and positive word of mouth diminish the privacy issues, research has shown, and Facebook benefited maximally. Currently, the privacy of Facebook is more questioned.
Overall, Facebook chose a more proactive strategy, they differentiated themselves on features like the news feed, the real names, and the privacy topic. When introducing the mobile app on the right time they gave Myspace the last push over the edge. And in the end, Facebook was the winner that took it all.
.Eisenmann, T., Parker, G., and Van Alstyne, M.W. 2006. Strategies for Two-Sided Markets. Harvard Business Review 84(10) 92-101.
Li, T., and Pavlou, P. 2016. What Drives Users’ Website Registration? The Network Externalities versus Information Privacy Dilemma.
(https://www.statista.com/statistics/272014/global-social-networks-ranked-by-number-of-users/)
(http://www.forbes.com/sites/adamhartung/2011/01/14/why-facebook-beat-myspace/#4bd2b7dc7023)
(http://www.diffen.com/difference/Facebook_vs_MySpace)
http://www.pymnts.com/news/2012/pymnts-daily-roundup-august-1-2/
http://platformsandnetworks.blogspot.nl/2011/07/business-model-analysis-part-2.html
Making sense of Internet Platforms: Network Effects and Two Sided Markets
