What can I learn about internet business from these charts?


0

Out of curiosity I compared traffic of various social networks and top portals, got two interesting charts -

http://trends.google.com/websites?q=yahoo.com%2C+facebook.com%2C+msn.com%2C+myspace.com&geo=all&date=all&sort=0 ( yahoo.com, facebook.com, msn.com, myspace.com )

http://trends.google.com/websites?q=hi5.com%2C+friendster.com%2C+bebo.com%2C+twitter.com&geo=all&date=all&sort=0 ( hi5.com, friendster.com, bebo.com, twitter.com )

Clearly except facebook and twitter, all web companies peaked around July 2008 to October 2008. This is the same period when recession hyped.

So what went wrong with these companies? and how could facebook and twitter successfully survive in a weak economy??

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asked Nov 8 '09 at 19:33
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Arpit Tambi
1,050 points
Top digital marketing agency for SEO, content marketing, and PR: Demand Roll

3 Answers


4

This industry is following the technology adoption lifecycle - where the market/technology has reached the majority portion of it's lifecycle.

Geoffrey Moore has a book on this specific phase, which he calls it "Into the Tornado "

As with all new markets/technology that reaches the masses, they follow the phases

Innovators - SixDegrees.com, Friendster.com, Myspace.com - the early development saw a few successful experiments that gained tremendous traction - and as systems scale, there were lots of things that could go wrong. Technology wise, Friendster switched from JSP to PHP and market wise, people were finding out how to use this early technology. Friendster had a lot of early issues which were not resolved well that ultimately lead to users leaving it for another network - issues such as privacy, removal of accounts, et al.

The Chasm - In getting tremendous adoption, there are some barriers where the value proposition of the service would become clear and word of mouth is very strong amongst its users. During this phase of the industry, MySpace managed to saturate an important youth segment - revolving mainly around music - and had some customization features that appealed that group - creating a very vibrant use case as new bands were being discovered on MySpace (Artic Monkeys ). During this phase, other startups started popping up and Facebook, Bebo, Hi5, LinkedIn, Orkut, OpenBC, Zorpia, et al were learning from the plentiful of adoption lessons available. Digital cameras also started becoming more widely used, hence social sites had a very compelling feature over traditional community sites - photos of the participants.

Friendster at this phase wasn't scaling well - pages took too long to load during peak hours and users started looking for alternatives.

Early Majority - In this phase, Metcalfe's Law kicks in big time, Facebook had tremendous momentum by saturating the colleges market and even high school - This is the tornado phase - where new adopters are looking for a very compelling service - (1) Availability (2) Ease of use (3) Where their friends are at. Market leaders are made during this phase, while MySpace had initially gained the lead - their flexibility in allowing customizations, security & privacy issues - lead them to their exit to News Corp.

Exits by founders usually mean transition - and transition usually means the development roadmap gets stalled for a while - this is where Facebook started catching up. Facebook continually incorporated ideas (widgets), updated their interface based usage figures & A/B testing.

Facebook also implemented strong platform oriented initiatives such as an API mechanism to involve third party development in providing services to its users - allowing the growth of companies such as Zynga - while MySpace was busy inhibiting successful third party developers such as Slide and Photobucket.

The writing is already on the wall. Nobody wants to use a poor service.

Here's a story about friendster/myspace during this period.

Late majority - In this phase, consolidation would tend to occur as the market saturates out - hence creating a ripe opportunity for startups to occur again, in providing a different value proposition - as with all new industries, specific niche players would emerge and other similar outfits would combine.

In all four phases - the skillset of the company leadership are entirely different, Geoffrey Moore's books describes them in details - as what made them successful may become a hindrance.

In summary, when there is a new product or service that can allow for a new and/or better way of doing things not possible before - the new market created does not follow much of the general economy - and they go along their own paths - the most compelling example of such a phenomenon is non other than Moore's Law, which Craig Barrett mentioned that having lived through multiple recessions - nothing has stopped the doubling of computing power every two years.

Twitter IMHO is in the chasm crossing phase - Google bought their initial competitor, Jaiku - way too early before the technology reached much potential. If they do not get a strong competitor to challenge them, there is a chance that they might fall into the chasm. Might still be profitable - but they are quite lonely up there now. Sometimes you need a competitor to make you stronger.

answered Nov 11 '09 at 19:31
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Alex Lam
699 points
  • Wow!! You answer actually surpassed all my expectations. Will need to re-read it several times to capture the full meaning and will consider buying the book you mentioned. Thanks and plz let me know ur email address so that I can connect with you. – Arpit Tambi 9 years ago
  • Let me know if you have further questions or areas to clarify - my linkedin profile on my profile - you can add me from there. Glad to have helped. – Alex Lam 9 years ago
  • Sent a message through your linkedin profile :) – Arpit Tambi 9 years ago

0

It is hard to tell precisely what is going on with any particular company, but, in the second it appears that Twitter has attracted the people that will use the service, so any revenue will need to come from the current users.

Myspace seems to be losing a great deal of unique visitors, but the other three are all seeing upticks at the end, so it would be hard to tell which of the three are doing well, as you would need to look at how long they spend on the site, how active they are on the site, basically, try to categorize what they are doing.

A graph can have so much read into it, it would be nice if you could see the same graph along with ad revenue and demographics, perhaps, as a starting point, to better put some reasons or context to the changes.

If the price of gas is $7/gal for example, you could argue that that means there is some shortage, that production can't keep up with demand. But, if you see a graph of the price of gas along with the strength of the USD then you will see that if the dollar is very weak the price will go up. It puts the price into context, without so much guesswork.

answered Nov 9 '09 at 10:45
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James Black
2,642 points
  • but what's so special with facebook, its just a cleaner version of myspace or am I missing something? – Arpit Tambi 9 years ago
  • I think the main difference is where the users are, and where your friends are. So, my wife is Canadian, and everyone she knows is on Facebook (it is popular in Canada) so she is on facebook. – James Black 9 years ago
  • Yeah, but let's take MySpace which was huge 2 years ago, so in theory people should have preferred myspace, but opposite happened. They went to FB just bcuz FB offered a better User experience? – Arpit Tambi 9 years ago
  • or is it that myspace shifted its focus to money but FB is not so aggressive about money? – Arpit Tambi 9 years ago
  • You would want to graph their cash flows as well as their market share. You could also put on certain events, such as when they announce or make policy decisions, and see if there is a change at that point. – James Black 9 years ago

0

The answer would be the management team of facebook and twitter focused on the end users and less on gaining marketshare. That strategy would help gain market share automatically.

anup

answered Nov 9 '09 at 00:26
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Anup
547 points

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