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While MySpace maintains a significant lead over Facebook in terms of US audience (73.7m unique visitors in May to Facebook's 35.6m), Facebook attracted 123.9m total unique visitors, solidly ahead of MySpace's total of 114.6m. But this triumph over MySpace might be a hollow victory. For better or worse, the majority of the Madison Avenue advertisers that upstarts like Facebook hope to court spend most of their dollars trying to reach consumers in the US. Some international traffic is notoriously difficult to monetize and as many online businesses know, traffic from certain countries is virtually impossible to transform into revenue. Although many brands serve international markets, as anyone who has sold online advertising will probably attest, international traffic is often a turn-off. This means that Facebook will probably have to look beyond Madison Avenue in an attempt to monetize its international traffic. This poses some challenges. Facebook's popularity outside of the United States appears to be more the result of viral popularity than a concerted effort to <a href="/blog/2288-going-global-tips-for-internet-startups">go global</a>. The company's localization efforts are <a href="http://www.globalbydesign.com/blog/2008/01/14/is-facebook-translation-worthy-or-just-plain-cheap/">dependent</a> on volunteers and its only office outside of the United States is in London. Compare that to MySpace, which has set up 20 offices outside of the United States and focuses on customizing its international versions. As noted by News.com's Caroline McCarthy: <blockquote> "MySpace representatives have explained in the past that their aim is to build communities centered on regional culture, not to simply expand the same networking tool worldwide." </blockquote> That said, Facebook has managed to become an international player whether it meant to or not. But it still lacks the local experience, cultural expertise and relationships in most of the countries where it has become popular. Given that major brands' regional ad spending is typically controlled by local subsidiaries or local agencies that make decisions with some level of autonomy, Facebook will need to develop closer ties with brands locally. This is no small task and even then, there's no guarantee that Facebook will find much money. After all, with Madison Avenue <a href="http://news.cnet.com/8301-10784_3-9959358-7.html">still showing reluctance</a> to write big checks for advertising on social networks, the chances that Facebook will find more willing ad buyers outside of the United States is quite unlikely. In some sense, I believe Facebook may wind up facing a problem similar in nature to YouTube (and interestingly, YouTube <a href="http://newteevee.com/2008/01/31/youtube-update-majority-of-traffic-is-international/">also</a> faces the issue of monetizing a significant amount of international traffic). In my post on Monday, <a href="/blog/2539-cuban-hulu-is-money-youtube-isn-t">it was noted</a> that under YouTube's current model, it is possible for the company to lose money the more popular it gets. In Facebook's case, it has to bear the burden of serving nearly 124m unique visitors each month, only 35.6m of whom are the American consumers that a significant number of brand advertisers covet most. The costs of serving each visitor is the same for Facebook regardless of each visitor's location, yet approximately 88m of those visitors are realistically more difficult to monetize. Unfortunately for Facebook, its costs aren't insignificant. The $100m it recently raised in debt <a href="http://venturebeat.com/2008/05/09/facebook-borrows-100m-to-build-out-its-infrastructure/">is reportedly</a> allocated exclusively for servers and infrastructure, demonstrating that building a profitable social networking business isn't quite as inexpensive as <a href="http://www.drama20show.com/2007/06/23/the-5-myths-of-web20/">Web 2.0 myths</a> would have us believe. Thus, Facebook is in the unenviable position of not only trying to figure out how to turn a profit on the second largest social networking audience in the US, but in the far more unenviable position of trying to figure out how to turn a profit on the largest international social networking audience. <a href="/blog/2540-are-virtual-goods-the-solution-to-the-social-network-monetization-conundrum">As I noted</a> yesterday, contrary to what Facebook VP Chamath Palihapitiya states, social networks like Facebook don't have "five to 10 years" to figure it out. The timing of Facebook's launch in 2004 was ideal. But with rising costs, significant monetization challenges <a href="/blog/2467-battle-of-the-research-firms-emarketer-vs-forrester">becoming</a> more recognized and a global economy <a href="http://www.reuters.com/article/bondsNews/idUSL1280262520080619">teetering</a> on the brink, the timing for Facebook's triumph over MySpace may not be so good. The currency of pageviews goes through volatile cycles of devaluation and revaluation. Those who don't exchange pageviews for greenbacks before the devaluation occurs are in for some hurt. Somehow, I suspect that Facebook risks becoming the greatest example of this since Bubble 1.0.

<FormattedContent xmlns="http://www.e-consultancy.com/schema/formattedContent/"> <Paragraph>While MySpace maintains a significant lead over Facebook in terms of US audience (73.7m unique visitors in May to Facebook's 35.6m), Facebook attracted 123.9m total unique visitors, solidly ahead of MySpace's total of 114.6m.</Paragraph> <Paragraph>But this triumph over MySpace might be a hollow victory.</Paragraph> <Paragraph>For better or worse, the majority of the Madison Avenue advertisers that upstarts like Facebook hope to court spend most of their dollars trying to reach consumers in the US.</Paragraph> <Paragraph>Some international traffic is notoriously difficult to monetize and as many online businesses know, traffic from certain countries is virtually impossible to transform into revenue.</Paragraph> <Paragraph>Although many brands serve international markets, as anyone who has sold online advertising will probably attest, international traffic is often a turn-off.</Paragraph> <Paragraph>This means that Facebook will probably have to look beyond Madison Avenue in an attempt to monetize its international traffic. </Paragraph> <Paragraph>This poses some challenges.</Paragraph> <Paragraph>Facebook's popularity outside of the United States appears to be more the result of viral popularity than a concerted effort to <Link URL="/blog/2288-going-global-tips-for-internet-startups" Window="Self">go global</Link>.</Paragraph> <Paragraph>The company's localization efforts are <Link URL="http://www.globalbydesign.com/blog/2008/01/14/is-facebook-translation-worthy-or-just-plain-cheap/" Window="Self">dependent</Link> on volunteers and its only office outside of the United States is in London.</Paragraph> <Paragraph>Compare that to MySpace, which has set up 20 offices outside of the United States and focuses on customizing its international versions.</Paragraph> <Paragraph>As noted by News.com's Caroline McCarthy:</Paragraph> <Block> <Paragraph> <Quote>"MySpace representatives have explained in the past that their aim is to build communities centered on regional culture, not to simply expand the same networking tool worldwide."</Quote> </Paragraph> </Block> <Paragraph>That said, Facebook has managed to become an international player whether it meant to or not.</Paragraph> <Paragraph>But it still lacks the local experience, cultural expertise and relationships in most of the countries where it has become popular.</Paragraph> <Paragraph> <Emphasis>Given that major brands' regional ad spending is typically controlled by local subsidiaries or local agencies that make decisions with some level of autonomy, Facebook will need to develop closer ties with brands locally.</Emphasis> </Paragraph> <Paragraph>This is no small task and even then, there's no guarantee that Facebook will find much money. After all, with Madison Avenue <Link URL="http://news.cnet.com/8301-10784_3-9959358-7.html" Window="Self">still showing reluctance</Link> to write big checks for advertising on social networks, the chances that Facebook will find more willing ad buyers outside of the United States is quite unlikely.</Paragraph> <Paragraph>In some sense, I believe Facebook may wind up facing a problem similar in nature to YouTube (and interestingly, YouTube <Link URL="http://newteevee.com/2008/01/31/youtube-update-majority-of-traffic-is-international/" Window="Self">also</Link> faces the issue of monetizing a significant amount of international traffic).</Paragraph> <Paragraph>In my post on Monday, <Link URL="/blog/2539-cuban-hulu-is-money-youtube-isn-t" Window="Self">it was noted</Link> that under YouTube's current model, it is possible for the company to lose money the more popular it gets.</Paragraph> <Paragraph>In Facebook's case, it has to bear the burden of serving nearly 124m unique visitors each month, only 35.6m of whom are the American consumers that a significant number of brand advertisers covet most.</Paragraph> <Paragraph> <Emphasis>The costs of serving each visitor is the same for Facebook regardless of each visitor's location, yet approximately 88m of those visitors are realistically more difficult to monetize.</Emphasis> </Paragraph> <Paragraph>Unfortunately for Facebook, its costs aren't insignificant. The $100m it recently raised in debt <Link URL="http://venturebeat.com/2008/05/09/facebook-borrows-100m-to-build-out-its-infrastructure/" Window="Self">is reportedly</Link> allocated exclusively for servers and infrastructure, demonstrating that building a profitable social networking business isn't quite as inexpensive as <Link URL="http://www.drama20show.com/2007/06/23/the-5-myths-of-web20/" Window="Self">Web 2.0 myths</Link> would have us believe.</Paragraph> <Paragraph>Thus, Facebook is in the unenviable position of not only trying to figure out how to turn a profit on the second largest social networking audience in the US, but in the far more unenviable position of trying to figure out how to turn a profit on the largest international social networking audience.</Paragraph> <Paragraph> <Link URL="/blog/2540-are-virtual-goods-the-solution-to-the-social-network-monetization-conundrum" Window="Self">As I noted</Link> yesterday, contrary to what Facebook VP Chamath Palihapitiya states, social networks like Facebook don't have "<Quote>five to 10 years</Quote>" to figure it out.</Paragraph> <Paragraph>The timing of Facebook's launch in 2004 was ideal. But with rising costs, significant monetization challenges <Link URL="/blog/2467-battle-of-the-research-firms-emarketer-vs-forrester" Window="Self">becoming</Link> more recognized and a global economy <Link URL="http://www.reuters.com/article/bondsNews/idUSL1280262520080619" Window="Self">teetering</Link> on the brink, the timing for Facebook's triumph over MySpace may not be so good.</Paragraph> <Paragraph> <Emphasis>The currency of pageviews goes through volatile cycles of devaluation and revaluation. Those who don't exchange pageviews for greenbacks before the devaluation occurs are in for some hurt.</Emphasis> </Paragraph> <Paragraph>Somehow, I suspect that Facebook risks becoming the greatest example of this since Bubble 1.0.</Paragraph> </FormattedContent>

2008-06-20T23:43:00+01:00

econsultancy_xml

<a href="http://news.cnet.com/8301-13577_3-9973826-36.html">According to</a> comScore, Facebook has overtaken MySpace as the world's most visited social network.

<FormattedContent xmlns="http://www.e-consultancy.com/schema/formattedContent/"> <Paragraph> <Emphasis> <Link URL="http://news.cnet.com/8301-13577_3-9973826-36.html" Window="Self">According to</Link> comScore, Facebook has overtaken MySpace as the world's most visited social network.</Emphasis> </Paragraph> </FormattedContent>

false 2541

For background on online PR and social media more generally, It's worth reading our (free to registered users) <a href="http://econsultancy.com/reports/online-pr-and-social-media-trends-briefing">Social Media Trends Briefing</a> (June 2009). Econsultancy has also published <a href="http://econsultancy.com/reports/social-media-and-online-pr-digital-marketing-template-files">Social Media and Online PR Template Files</a>, which you can adapt and use for your own projects. For innovation in this space, download our <a href="http://econsultancy.com/reports/innovation-report">Innovation Report</a>.

365840

comScore: Facebook surpasses MySpace false

2008-06-25T08:45:00+01:00

comscore-facebook-surpasses-myspace

2009-04-29T23:13:35+01:00

2009-10-13T09:41:23+01:00

864