MySpace versus Facebook: Analysis of both traffic and ad revenue, using Google Trends

(above, Facebook beating MySpace in Australia with the crossover at Oct 07)

MySpace versus Facebook

As some of you know, I’ve previously written about the MySpace versus Facebook topic, both a year ago in the post Wanna bet? In 1 year, will Facebook be bigger? Or will MySpace? and MySpace versus Facebook: Winning in the US, Losing internationally. In general, I’ve taken a fairly pro-MySpace stance, since I think there’s a lot of qualities of the site which are lost on the typical technogeek here in San Francisco.

That said, it’s undeniable that MySpace has been losing ground internationally, while both have plateau’d here in the US. Interestingly enough, I think the fact that it’s possible for a newer product like Facebook to overtake MySpace creates a surprising argument:

Social networks have weaker network effects than previously speculated

After all, if the networks effects would be strong, you’d figure that MySpace would be able to hold onto their lead anywhere, regardless of product quality, when in fact that hasn’t been the case.

Playing around with Google Trends

After reading many mentions of this new product, I decided to play around with Google Trends tonight. I started to compare MySpace versus Facebook traffic from around the world, since you can, for example, ask how MySpace versus Facebook is doing in the US, over the maximum time period.

A *big* caveat on the discussion below is that obviously the Google Trends product is new, and lacks any track record on how accurate it is. You can consider the following discussion very much contingent on these factors – if anyone wants to do a similar view of this in comScore or another service, would be happy to link to it! (A recent but coarser chart of comScore numbers can be found here)

Analysis of traffic trends, domestically and internationally

Anyway, here are a couple thoughts come out when you play around with the “major countries” listed in the Google Trends product:

First off, MySpace is staying dominant in a few countries, like the US, Germany, Italy, Japan, etc
Across the board, MySpace is the incumbent, and Facebook is coming from behind
However, Facebook beaten MySpace on traffic in 14 countries over the last year
In particular, June ’07 to Oct ’07 was particularly rough for MySpace, where 10 of the 14 countries were passed in this period
In the markets where MySpace leads, you may consider them “mature” markets in the sense that both services have plateau’d in traffic – it’s not like MySpace growth is outpacing Facebook’s

Here’s the full table of data, so you don’t have to do the work:

country	myspace leads	facebook leads	crossover date
Australia		X	Oct-07
Austria	X
Belgium		X	Nov-07
Brazil	X
Canada		X
China		X	May-07
Denmark		X	Oct-07
Finland		X	Sep-07
France		X	Nov-07
Germany	X
Hong Kong SAR China		X
India		X
Italy	X
Japan	X
Netherlands		X	Mar-08
Norway		X
Portugal	X
Singapore		X	Jun-07
South Korea		X	Sep-07
Spain		X	May-08
Sweden		X	Jul-07
Switzerland		X	Oct-07
Taiwan		X	Apr-07
United Kingdom		X	Jun-07
United States	X

Pretty interesting right?

Overlaying advertising markets
Now, the second question is, how do advertising markets play into this? After all, it’s not enough to win on traffic, but you want to win on valuable traffic. For this discussion, I’ll borrow a diagram Jeremy Liew from Lightspeed wrote about regarding ad spend both domestically versus internationally, in 2007:

Here, you see that the US is by far the largest ad market, and is worth more than the rest of the world combined. I think that’s a key observation. Another observation can be made by combining this diagram with the traffic table above:

country	myspace	facebook	crossover	2007 ad spend (MM)
United States	X			19500
United Kingdom		X	Jun-07	4727
Japan	X			3397
France		X	Nov-07	2548
China		X	May-07	1269
Germany	X			1142
Canada		X		950
South Korea		X	Sep-07	779
Brazil	X			400
India		X		86

From this view, you can see that MySpace and Facebook are really trading blows in the larger markets. While the MySpace lead within the US is obviously the most important, from a revenue standpoint, it’s obviously not a good thing to see Facebook overtake MySpace in the UK, France, China, South Korea, and India, which are key markets.

Obviously, the best way to do this analysis would be to do a weighted sum of the market share in each country, but because there’s so much variance in CPMs based on how they are selling, a more granular model might actually create false assertions. If anyone has better data, would love to get it and would gladly repost here.

Conclusions

There are a couple key things here which I think are pretty interesting and important:

MySpace leads in the major market (the US) but is losing ground overseas
The overseas losses are material losses – not just random non-revenue countries
The major losses all occurred in the mid/late 2007 timeframe
Several markets are plateauing in traffic, meaning that the social network market is starting to mature – consider that MySpace+Facebook uniques, duplicated, is over 90M active users, which is a huge percentage of the online audience in the US
How strong are the network effects of social sites, if incumbents can be displaced? Maybe it’s not so strong after all

Comments or suggestions welcome!

And please link to me if you like this article

UPDATE: Chuck Lam does a good analysis of the fact that China (and possibly other countries) are using domains other than Facebook.com and MySpace.com. For example, China is all about MySpace.cn, and leads Facebook in that regard.

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Written by Andrew Chen
June 21st, 2008 at 1:56 am

Nnamdi

I think that the real answer is that the products are not direct substitutes for one another. They certainly have an overlap in feature set, but their initial focus was on very different underserved clusters, and they have very different cultures. (real vs imagined identity etc)

More details on fred’s blog here: http://chimprawk.blogspot.com/2007/11/google-opensocial-and-situational.html
http://radionovafriburgoam.blogspot.com/ MARCELO XIMENES

http://radionovafriburgoam.blogspot.com/
http://www.jbryanscott.com/ J. Bryan Scott

It would be interesting to compare numeric differences between Facebook and MySpace unique users and see how material those leads are.

Calculating market shares of Facebook and MySpace and multiplying by probable social network ad spending would be very interesting. This would quantify how economically material those international markets.
http://qwang.net Q dub

Powerful central statement, but to really prove it you have to show people leaving an incumbent to a different network and re-invest time in recreating their graph+content. However, I believe this flip in market share is the result of a gross-adds game, not a defections game.

The network effect holds only true for people you actually know or vague care about. joe schmoe in middle arkansas signing up for MySpace doesn’t increase it’s value for me. It could be that Facebook and Myspace are attracting totally independent social segments with little overlap and thus, it’s really a matter of whoever has lower penetration in their segment getting greater adds.

One could also argue that MySpace is culturally more American, while Facebook is far more culture-neutral (and the facebook vs MySpace race in Asia could be utterly irrelevant since it appears they don’t stand a chance against local players).

Finally, from a monetization point of view, greater concentration in 1 country is unequivocally a good thing. Inventory from different countries probably have zero chance of being bundled and sold together. Facebook has to find more advertisers for a more fragmented audience, while MySpace can enjoy more or less one-size-fits-all advertising deals with summer blockbusters =)
http://doteduguru.com/ Kyle James

Great summary and critical look at the comparison. I like how your honest about the inaccuracies that could affect the results, but are still very observant. This is the first really good, heck the first at all, I’ve seen of the new Google Trends feature.

With MySpace new redesign and Facebook attempting to keep pushing out the new features I think we are in for an excellent battle over foreseeable future.
Adam

I think the network effects of social networks are strong. But the ability to multi-home is very easy. I can manage a facebook and myspace account with little extra effort. (compared to VHS and Beta where you only would want one or the other) I think Facebook also was easier to switch to because it didn’t take much time to get up and going – I could make a witty profile about myself in 20 minutes.
Adam
http://mind-logger.blogspot.com Martin

Your central statement is “Social networks have weaker network effects than previously speculated”, when looking at the whole world. But what if the network effects would stop at the borders? Or at least much less relevant beyond the country borders?

I have a hunch that factors to social networks growth include winners in early developments in a country (which player gets the hype first) and the relevance of local content (Korea is the key example).

As for the hypothetical MySpace being rooted in north American, I will recall that Facebook has always been first in Canada (see http://trends.google.com/websites?q=myspace.com%2C+facebook.com&sa=N&geo=CA).
http://www.socialadblog.com Hussein Fazal

Great Post. One thing however I wanted to mention is that facebook’s Internalization is a great long term play. Over the next few years, economic power will be spreading from the US to many other countries. Another stat – in the next few months – China will surpass the US in terms of total internet users.

Yes, it will take time for non-US internet traffic to mature and command online advertising dollars, but facebook is making a great long-term play.

You can read more of my thoughts on this on my blog at http://www.socialadblog.com
http://adecon101.blogspot.com DJ Chang

Great discussion. I’ve cross posted at:

http://adecon101.blogspot.com/2008/06/news-modeling-real-market-value-of.html

A few observations.

1. Data gathering is still a problem. How much overlap is there among network data? Who truly owns the member?

2. DCF and asset-pricing also cover valuation of social networks. It’s harder to choose the valid multiple as measured by the inverse of the difference between expected growth and risk. Mr. Arrington’s approach with country dominance brings better methodology to this theoretical valuation method.

3. Don’t overlook the core premise – that all Internet advertising has become a global business.

Keep the good conversation flowing.

-Dash Chang
http://www.marshallkeen.com/blog Andy Warren

The key implication here is that real social networks transcend the platforms and exist despite them rather than because of them. The platforms are merely communication conduits that can easily be replaced. It only takes one bridge from an existing network to switch to another platform and the whole network can move across.

A physical social network can exist through coming together in one place (school, work, club) and then transition to meeting in another location (pub, event, holiday, home etc.).

The friend gathering trend on a specific social networks soon grows as stale as beyond the initial excitement that a fast growing group brings there’s an inherent limit to the interaction beyond a certain point. To recreate the excitement (if it can still exist) users will seek to repeat the exercise on a different platform.

The logical alternative is to seek a platform that provides connections with a common bind or interest that is stronger than mere existence on the network and therefore longer lasting.
ray

good analysis. i think switching costs apply – and are important, still.

When facebook ‘went viral’I feel social media networks were still in their infancy, to the vast majority anyway, with little invested by them. When there wasnt mass adoption) and user experience innovations hadn’t matured on social media networks (user experience value exceeded switching costs early on) which allowed switching costs to never properly take hold.

two things:
firstly, we forget what facebook, initally anyway, was – a cluster of college ‘community’ networks. this was a vibrant community. this provided a sustained critical mass, which built momentum when they opened to public –

second. fb had their own network effect (which was unique to them and we forget) – a far superior initial user experience – esp with the newsfeed – which was another form of network effects – viral effects.

I think real switching costs would now apply now – far more interactions. Future disruption could only come from innovative uses of location based services (mobile)

Andy Warren. some very good points.
adam

“Social networks have weaker network effects than previously speculated”

In the MMO industry, we went through a phase where people suggested that. I think most people ended up deciding that actually it was more a case of:

“Poorly realized or weakly supported social networks have weaker network effects than even only slightly-better new networks”

I think most people are happy with the idea that when a network is strong, it’s very strong, and that when it’s weak, it’s very weak, but it seems that when it’s “average”, it’s actually weak.

“How strong are the network effects of social sites, if incumbents can be displaced? Maybe it’s not so strong after all”

IMHO, MySpace has historically mostly had laughably poor support for social networking, and FaceBook is hardly any better. The newsfeed for FB was great, but … there’s so much more that could easily be added at the platform level to make it much more valuable as an SN platform.

The entire messaging system, for instance, is weak compared to the basic expectations of communication.

Or, how about the ease of finding existing friends on FB, instead of inviting new ones? Awful.
http://www.thewebissocial.com alisa

thanks for publishing this data!
kriptonik

Thanks for sharing

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MySpace versus Facebook: Analysis of both traffic and ad revenue, using Google Trends

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