Facebook – Myspace = 100% revenue share

Josh at Redeye VC has some *excellent* points about the coming big battle between Facebook and Myspace for web developers:

If you ran a venture-backed company and had to decide whether you wanted to focus your effort on: (a) a property that welcomed you in and let you keep 100% of the revenue you generate or (b) a company with a vague policy that doesn’t let you generate any revenue, which would you choose? I don’t think it’s even a decision. It’s an IQ test.

However, it is significant that Myspace remains far larger than Facebook in terms of a user base and also important is that users, not developers, have driven the success of Myspace.

Facebook is hard to analyze because until very recently they had a much more restrictive policy on new accounts, opening them only to groups associated with businesses or universities. To join Facebook I initially had to contact my old alma mater – University of Wisconsin – to get an alumni email set up, then redirect that to my current mail. No big deal but certainly a barrier to entry. Facebook now (wisely) has opened itself up to everybody and (also wisely) is pursuing a very open approach to API usage and social media. Most importantly Facebook is going to allow those who build applications around Facebook to keep 100% of the revenue those create.

I think this “100% revenue share” is a brilliant approach because the Facebook “whole” will be much greater than the sum of these parts. Thus Facebook can make a *lot* of money through the extra traffic and advertising created by websites and developers and users gravitating to the Facebook social media ecosystem. The loser in this equation would be Myspace and other sites (that would be MOST sites) that try to create social media environments but don’t share much of the revenues.

Bebos, billions, and why Yahoo is starting to piss me off.

Yahoo may buy Bebo, the British “Myspace”, for a billion dollars. That is a LOT of money – about 3% of Yahoo’s market cap. Presumably this, like Yahoo’s unsuccessful Facebook aquisition attempt, is Yahoo’s approach to recapturing the market dominance it enjoyed back in the day. Dominance through the aquisition of a social network rather than developing their own.

They should know better than to trust their existing criteria for decisions about aquisitions. Yahoo is the company that aquired Overture’s pay per click technology years ago, and then managed to cede dominance in that area to Google. Ever heard of Google? Yahoo probably could have *owned* Google, but it seems higher management didn’t think search had the monetization potential of … broadcast.com which was purchased for billions.

Isn’t it time for top management at Yahoo to let innovation, not aquisitions, rule the day? This approach has worked very well for Google, who’s main mistakes now appear to be in aquiring things like YouTube which in my opinion is unlikely to recover YouTube’s 1.6 billion price tag and will certainly pester Google with big money lawsuits for decades. Yahoo’s still got a LOT of great technical people, especially in the developer and new business divisions. More importantly, the world is producing hundreds of thousands of new, brilliant innovators every year, most of whom are chomping at the bit to bring new and exciting innovation to the hungry online world. Why not devote the billions to this rather than purchasing companies with marginal revenues and long term prospects that are more hope and prayer than reality?

With the latest flurry of high priced aquistions it almost seems like, to the big players, the billion dollar deal is the new million dollar deal. I remain skeptical that deals of this size pay off in the long run – certainly very, very few of the early pre-bubble ones did not pay off for companies. I’d suggest that the smaller deals (e.g. Flickr) do have potential, but that Yahoo’s top management is looking for a killer deal that simply does exist while the innovation approach (ie much, MUCH more support to the core values and teams at Yahoo) is starting them in the face. Traffic? Yahoo’s got plenty of it. Modest changes can send millions of Yahoo users to any new idea, so why not do this *a lot more* and test *a lot more ideas*.

Edison suggested that there is always a better way, and it’s time for Yahoo to ….. find it.

More Bebo-logy from Techmeme:

Yahoo may net Bebo owners $1bn

 

 

Bebo/YHOO: My Rumor’s Bigger Than Yours

Yahoo May Be Bidding For Social Network Bebo: Report

Yahoo: When You Can’t Buy Facebook, You Buy Bebo

Bebo is not for sale


Myspace = Music Space = test of future of music?

Although it’s nothing new technologically or musically, Myspace’s bold new music initiative, with Napster Sean Fanning’s cleverness, will very likely be a great look into the future of how people are going to relate to music both online and offline. Why?

1. Myspace is a huge community and the demographic is excellent for music distribution testing and refinements.

2. Myspace is the top online community, and this will be the first time technology has been leveraged on this scale to match bands and fans.

3. The music industry, most musicians, and almost all music fans remain prisoners of the old style notions of music marketing, distribution, and production. Myspace alone could change all that as it will democratize the selection process. More popular bands will rise on the basis of bigger fan bases rather than marketing manipulations and cross promotions.

I’m not saying this will change things, just that it’s a great test of how resilient the current music industry will be when it comes up against the new vision of music as open, democratic, narrowcasted, democratic, and cheap or free. Youngsters may still go for the Disney groups that are so brilliantly cross promoted on the TV show, in concerts, and online. But teens and young adults are the key market. Will they keep paying the middleman as the new bands offer increasing amounts of online interaction in exchange for paying them directly? The death of music mogul million dollar salaries and billion dollar profits won’t bother anybody, even those inside the industry.

I just hope I can download “The Funeral March” and play it while we bury the dinosaurs and bring in the bands.

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