When Was MySpace More Popular than Facebook?
I am writing about an article that was written in 2007. During this time, social networking was one of the most popular activities on the web. And believe it or not, MySpace was by far the best social networking site. They had about twice as many users as Facebook and had almost 7 times the amount of profit. For my generation, it is very hard to imagine a time when Facebook did not exist and let alone was not the best social networking site.
In 2007, MySpace was nearing the end of their growth phase and Facebook was just beginning. At this point, Facebook users were limited to college students and its popularity growth can be described by networking principles. Let’s look at one social network user, X. For simplicity, I will assume that there are only two social networking sites, Facebook and MySpace, because the article only considers these two social networks relevant. Also, I assume that a social network user will not use both sites at once. I am sure there are some people that at one point maintained both a MySpace page and a Facebook page. But, this is very exhausting and these people will most likely eventually pick one or the other. Now, let’s assign p to be the fraction of X’s friends that are Facebook users and 1-p to be the fraction of X’s friends that are MySpace users (again there cannot be a friend who uses both in this model). Then lets use the following payoff matrix to represent two social network users’ payoffs.
If both users were on different sites, then there is a payoff for both of zero because neither person has a friend to network with. If both users were on MySpace or Facebook, then they would have a positive pay off of 1 or 3 respectively. Facebook’s payoff is higher because their website was able to adapt and change more quickly than MySpace’s. Also MySpace was set up more for music and entertainment as opposed to Facebook which was set up for more personal interactions. In this case there are two equilibria, both users to be on Facebook and both to be on MySpace. The network of social network users originally consisted of all MySpace users because Facebook was not invented yet. We can find the threshold for when users switch from MySpace to Facebook. This would mean that the payoff for Facebook is greater than that of MySpace. So 3p> (1-p); p> ¼. Below is a sample network of social network users, where everyone starts off using MySpace.
Then one college student joins Facebook, maybe this is Zuckerberg or one of his close friends.
Now we look at this Early Adapter’s friends to see if any of them will convert to Facebook because their fraction of friends on Facebook, p, is greater than the threshold, ¼.
This is about the stage that the article was written. A small fraction of the network is on Facebook, which consists of college students. But, unpredicted by this article, this network is nowhere close to equilibrium. Facebook eventually surpasses MySpace in popularity. We can continue the algorithm on the network by checking all of the Facebook users’ friends and seeing if their p is greater than ¼. Below are the different steps of the algorithm.
In the end, we have reached equilibrium and there are no more people who want to switch to Facebook.
I believe that today we are very close to this equilibrium and eventually Facebook will become less popular unless something is drastically changed in their model. This drastic change will probably be a fad though and will just put off the inevitable decline. An example of a drastic change was when Farmville was released. Although, this was on the other side of the growth cycle where Facebook was drastically increasing, Farmville created a great incentive for people to go on Facebook. They would not only feel the need to find out what their friends were doing but also to “grow” crops. This ingenious idea forced people who were serious about the game to go on Facebook very frequently to prevent their crops from dying because their crops would “grow” even when they were offline. The article writer believes that Facebook is only temporary as well. She suggests that social networking sites are like a nightclub or a high school dance. Everyone goes to the club or the high school gym, but it becomes boring after a while because there is nothing new to do.
The article also explains that social networks are trying to make the shift to an advertisement-based model, which allows them to be more profitable. Advertising companies would love to advertise on social networks because they have a very high click-through rates. But, there is a trade-off because people are sometimes too distracted by what their friends are doing to notice the ads. The allocation of ad slots to advertisers can be described by the perfect matching model we discussed in class. Each advertiser has a price that they are willing to pay for an ad slot. Then we assign prices to the ad slots, so that they are market-clearing prices and a perfect matching occurs. Below is an example of how this process is applied using arbitrary numbers. The prices for the add slot begin at zero and each advertiser’s value of each ad slot is listed in the table on the right. The first row shows Advertiser 1’s value for ad slot A, B, and C respectively. Advertiser 1 has the greatest value each of these ad slots. This advertiser can be seen as a big advertising company that is willing to pay a lot of money for one ad because they have a lot of money in general. The second advertising company has a decent amount of money to spend on advertising, but not as much as 1. So, their values are just below those of Advertiser 1. The last advertising company, 3, does not have that much money to spend of advertising so their values are very low in comparison. In terms of the ad slots, the first ad slot, A, is very popular and all three companies value it the highest. This could be a bigger add or one that is in a more common place to maximize the views, which hopefully maximizes the amount of people that click on the ad. The last ad slot C, is probably at the bottom of the page and is very small, so the advertisers are not willing to pay much for it. Slot B is in the middle for these two slots.
By connecting the advertisers to the ad slot that they want most, we can see that the first ad slot is in very high demand. Therefore, the algorithm says to increase its price and update each advertiser’s value for this ad slot by taking the price they are willing to pay for it and subtracting the market price of the ad slot. We then continue this algorithm until there is a perfect matching where every advertiser is paired with the ad slot that it values the most for the current market prices (remember that only one advertisement can be assigned to an ad slot). Below is the final stage of the algorithm where each advertiser can be matched with one of the ad slots and this slot is the one that it values the most. Advertiser 1 is paired with slot B, 2 with slot A, and 3 with slot C. Also the market clearing prices are 4, 2, and 0 for each ad slot respectively. This makes sense because the most valued ad slot has the highest market price. And the small ad at the bottom of the screen is free because no one wants to pay for it.
All in all, at the time this article was written MySpace was the most popular social network and Facebook was just gaining speed. Through the network model that we studied in class, one can see how MySpace users will switch over to Facebook. This is because once a certain percentage of one’s friends are on Facebook, it is more beneficial for that person to be on Facebook as well. Also, the article explained that social networks were beginning to use an advertisement-based layout in order to make more money. Using the market-clearing price assignment algorithm, the companies can value the bigger and more likely to be seen ad slots greater than the smaller ad slots. But, there is one downside to this model. Can social networks keep their users’ attention and interest when their site is filled with advertisements? Social networks work to constantly balance their popularity with their profit from ads. The article writer asks will social networks loose their following or will they continue to be one of the most popular activities on the web? Today, it is hard to imagine life without Facebook, but in the future who knows what new things will come and take its place.
http://www.time.com/time/magazine/article/0,9171,1686825-1,00.html
-MC