iHollywood

MySpace to get at least $9 Per User

Google announced that it has been chosen to provide search functionality to MySpace for the sum of at least $900M over the next four years. That's nearly $9 for each of MySpace's current user base of almost 100M. MySpace currently utilizes Yahoo search. Moving forward, Google will incorporate its search functionality into the service and utilize its AdSense program to generate targeted ads to appear in search results initiated in MySpace. Google maintains the first rights to sell search result ads that NewsCorp (MySpace's parent company) does not.

MySpace has been faced with questions for months about its long term ability to drive revenue. This deal, which will generate nearly as much money as the $1.2B NewsCorp spent to purchase Myspace helps answer those questions. Today, the deal is clearly a win-win for those involved:

• MySpace - The most important part of this deal is that it keeps MySpace's non-commercial appeal intact. Instead of placing ads on a user's homepage it focuses on generating revenue from search, something Google has experience in. The allure of MySpace is that users can create unique personalized pages and choose to be exposed to brands if they want. A user can become a friend of Coke if they want, but if they don't they will not be exposed to advertisements for the brand. This will help MySpace continue to capture the hearts and minds of users while allowing the site to expand its user base. While growing, MySpace can generate revenue that it had not been able to by integrating a revenue generating web search.
• Google - May have positioned itself to be the defacto engine of the MySpace generation. The money that Google must pay MySpace may pale in comparison to the amount of revenue it can actually generate from selling ad space on its MySpace search results. MySpace's nearly 100M members and growing ensure Google a captive search audience. If AdSense ads prove successful and appealing to this group, Google may be able to make a financial windfall far greater than the fee paid to MySpace. Additionally, Google can help MySpace improve other features of its service, further embedding itself in the MySpace culture. These may not be Google branded services but could provide revenue opportunities to Google. The opportunities include legal ad-supported video distribution, instant messaging, collaborative content programs, and other opportunities that will present themselves.
• Fox - Taking more control of search will make it even easier for Fox to promote its own properties to MySpace users. Even though Fox promoted its own series 24 through the Burger King page, Fox had to be careful not to turn MySpace into a commercial site. This could offend existing members and potentially inhibit future growth. Utilizing search results, Fox will not have to walk as fine a line between unique content partnerships on MySpace and promoting its programming and services to MySpace users.

The only remaining issue is, will MySpace continue to grow at its prophetic pace and maintain its user base? If so, this partnership will help propel Google to even greater financial success. If MySpace loses momentum in the coming years, Google may lose some of the $1B it must pay MySpace without being able to recoup it. At the moment this seems an unlikely scenario as MySpace continues to grow and expand into new markets.

CNN: Google signs $900M MySpace deal

Microsoft Has Spaces for Rent

Microsoft has launched Windows Live Spaces, its answer to social networking and an upgrade to MSN Spaces. The site will be integrated with Windows Live Messenger (formerly MSN Messenger) and Windows Live Mail (formerly Hotmail). Users will have the ability to decide who can view their pages and will be able to add contacts from Messenger and Mail to their Spaces contact list.

If another great social networking site came along, current networkers would probably use it. The reverse is also true.  MySpace is the vanguard of hip, cool, and anti-establishment (even though it is now owned by News Corp, but Microsoft may prove a more difficult sell. Microsoft is doing little to distance itself and its corporate persona from the site and risks turning off many  social networkers.

Microsoft should instead allow Spaces to exist as a beefed-up profile tool for Messenger and email users, but focus its social networking on its own destination for cool, XBox.  An XBox-branded social network would be differentiated by captive hardcore audience of gamers. As with a social network, Microsoft could use an XBox Live Card to track statistics from both XBox Live and non-Live games. An individual home page could be personalized to include features such as most-often-played games and high scores, and could be automatically updated from a network-connected XBox.

The community aspect would be built around competition and success. Friends could have a dynamically updated community leaderboard for various games to invoke competition and promote additional gameplay. Users could list people most-often beaten at XBox Live games on their sites and link to their profiles -- integrating social networking into Microsoft's hottest device.

A gaming social networking community would promote competition, leading to more gameplay. Evangelists from the community could help create new games and spawn grassroots marketing campaigns. With its huge installed-base of Xbox and XBox 360 users, Microsoft could begin to redefine social networking

--Josh Martin

See PC World's Microsoft Launches Windows Live Spaces

Not Made in but coming soon to America: Cyworld

Cyworld, the most popular social networking site in Korea has set its sites on the American market. Even though it is entering a crowded field led by MySpace, Friendster, and others the immensely popular Korean site expects to compete when it launches in mid-August.

Cyworld operates under a different business model than most other social networking sites requiring users to buy virtual items (wallpapers, icons, etc.) to decorate their homepage. This is in stark contrast to the business models of MySpace that allow users to freely personalize their individual page.

While selling virtual goods has worked well in Korea, it may prove a more difficult sell in the United States, especially with free alternatives readily available. Cyworld is aware of this possibility and expects to supplant that revenue with advertising dollars. Advertising may prove more of a turn off to social networkers who may view it as commercialization of a personal space. The demographic have already propelled the ringtone, ringback tone, and other personalization tools to success despite the need to pay for them which may be the proper business model as long as good are priced cheap.

It remains to be seen if American users are interested in another social networking site or if they already have their fill. With an interesting business model, the ability to link to a cell phone, and the virtual worlds it offers, Cyworld may find a winning combination.

MTV Throws Social Networking into a State of Flux

MTV recently announced its intentions to enter the social networking world. Initially launching in the UK and Ireland, the initiative will occur on multiple fronts; online, broadcast, and mobile. At its core, Flux appears to be attempting a merger of YouTube and MySpace. The question is, will the nearly 100 million users of MySpace who spend lengthy periods of time crafting their online persona and social network want to start all over again?

This dilemma brings broadcasting into the equation. In addition to the social network, MTV will launch a television station September 1, also named Flux. The station will feature the most popular content from the website and programming will be influenced by users who spend the most time on the service. It is this component that is the most intriguing on two key levels. First, it appeals to Generation Y's interest in fame. To know that utilizing a site could get your video on television may be appealing enough to garner interest. Secondly, allowing users to influence network programming appeals to the group's desire to make their own decisions. This is already a major driver of branding on social networking sites. Users have the opportunity to say both good and bad things about a company or brand on a page developed by the company.

The question that MTV, like YouTube must face is what to do with uploaded content that is uploaded. Not only must MTV now prevent it from appearing on the web but it also must stop it from being broadcast. While studio content may be easy to prevent from being uploaded right away, it is homemade clips that feature music that may prove more problematic. However, with MTV's reputation in the space and the ability to generate revenue it may be able to satiate the RIAA by paying royalties on content played on TV or may be able to secure rights to some music that fans could then utilize in their home videos.

To date, social networking has not focused on generating revenue for the user who is uploading their own content. How will MTV handle the sharing of revenue? Will any revenue be shared? If not, MTV may miss out on higher quality homemade content as it is distributed through other means that offer revenue opportunity.

Overall, the question that must be answered is, is the TV component enough to pare users back from MySpace or have them develop a second online social network? While it will clearly appeal to some users, it may be difficult to let go of existing social networks or divide time between the two. Pulling users away from YouTube will also be a challenge. With MySpace and YouTube clearly entrenched in generation Y, MTV's prime audience, Flux may prove a difficult sell. But with a big brand name and history behind it, people may once again say "I want my TV".

It would be wise for other corporations to recognize that MTV's Flux is not a prime opportunity to enter social networking. Users want to enjoy the non corporate environment that MySpace offers and may lash out at companies trying to develop new social networking sites as revenue generators or as means to promote their company and products to users.

Toyota's Massive Yaris Plans

Massive has its first client for the newly launched interactive in-video game advertising opportunity, Toyota. Continuing its online approach to promote the Yaris (also featured on MySpace) Toyota will insert interactive ads into Anarchy Online. The ads will appear in a location pre-approved by the game developers and will not interfere with gameplay.

Toyota and others have recognized that when trying to reach the younger generation tried and true methods are a thing of the past. In order to embrace Gen Y, companies are beginning to investigate opportunities to redefine their brands online. MySpace, Massive, and others provide new ways for consumers to interact with a brand, seemingly empowering the consumer while decentralizing the power of the brand's pushed message.

Social networking websites and Massive Multiplayer Online Gaming provide opportunities for users to develop a closer relationship with a brand and better identify and relate to it than in the past. On the social networking front, consumer can relate experiences both good and bad and choose to relate to specific brands. Even the U.S. Marine Corps has started using MySpace to find recruits. Online gamers can suggest other players check out the interactive ad if it is interesting. This provides additional depth to a message as trusted thought leaders can become evangelists for a brand.

Other brands have already begun to take note of this trend and it is expected that moving forward multi-platform campaigns will gain momentum. New advertising methods will provide greater access to Generation Y by appealing to their sense of control over their relationships by allowing them to choose to interact with a brand and not vice versa.