The New York Times has a good piece on the monetization challenges and opportunities faced by MySpace. Though the site is second only to Yahoo! in the traffic it receives, its revenues are less than one-twentieth of Yahoo!'s.
From the article:
In buying MySpace, Mr. Murdoch also bought a tantalizing problem: how to tame a vast sea of fickle and unruly teenagers and college students just enough to notice advertising or to buy things, yet not make the site so commercial that he scares off his audience. At the same time, he must address the real and growing concerns of parents and teachers who see MySpace as a den of youthful excess and, potentially, as a lure for sexual predators.
This echoes our past commentary on the challenges the company faces. But what about its opportunities? The company is exploring many ways to integrate advertising and monetization strategies that don't compromise the user experience. These include giving advertisers the opportunity to create profiles — making them, in essence, members of the MySpace community. This would no doubt come in tandem with promotions that would attract MySpace users to these profiles, where they would interact in ways that satisfy the marketing strategy of the advertiser. I'm a bit skeptical of this strategy, given young people's ability to sniff out a marketing message or commercial intent and the general anti-establishment, anti-corporate feel of the MySpace environment (I myself am a member and see this attitude embroiled throughout the MySpace community).
Other possible monetization strategies include charging the bands and video producers using MySpace to gain exposure. This also has its downsides, given that these are major traffic drivers against which the company should be careful not to raise barriers. MySpace could also infuse a classified component to the community, similar to eBay or Craigslist. This would make the site more relevant to the local search and media space. Also related to local is the opportunity to market MySpace to SMEs as an advertising medium.
From the Times article:
Fox officials wonder whether this sort of commerce, built on relationships, can be extended to small businesses. A Ford dealership in, say, Indiana could create a profile, said Mark A. Jung, the chief operating officer of Fox Interactive. The profiles themselves, he said, would probably be free, but MySpace would sell enhancements to help businesses attract customers and complete transactions, Mr. Jung said.
However, MySpace Cofounder Chris DeWolfe feels there are challenges in getting SMEs to do this and in getting MySpace users to have an interest in local business profiles. It is an interesting challenge given the opportunity presented by the company’s massive and quickly growing user base. It currently has about 70 million members, with about 250,000 signing up every day. We'll continue to watch this situation closely.
Elsewhere in the social networking world, yet another service has gained funding (see our post on this subject last week). Palo Alto, California-based 900 Seconds has raised a US$6.5 million first round of funding from Trinity Ventures and Sutter Hill Ventures.