Network Effects Killed Myspace
We now live in a world that is dominated by social media. Cultural norms have shifted globally due to the wide use of outlets like Facebook, Twitter, Snapchat, and Instagram. This has had a tremendous effect on the way information is spread in the US. Information is spread much faster through social media than it ever has. This leads to more information to be spread, and the length of relevance for current events to be much shorter. The cascading of information is on full display whenever Twitter erupts over a celebrity scandal or the latest shenanigans in a presidential election. This shift in culture has seen the rise of many social networks like the ones previously mentioned, and it has seemed the demise of one social network in particular, Myspace.
The downfall of Myspace started 8 years ago in the spring of 2008. That year, Facebook took the top spot in the world of social media. Myspace preceded to take a downward spiral and quickly fell out of relevancy. Many factors contributed to the death of Myspace; some of them had to do with huge strategic mistakes made by Myspace, others had to do with their inability to keep up with new technology and Myspace’s competitors took full advantage these mistakes. The swift collapse of Myspace can be well explained through the understanding of network effects.
From 2005-2008, Myspace was the most visited social network site in the world. It reached its peak during this period and enjoyed what would be stable equilibrium point. However, events from 2006-2008 would eventually drive Myspace’s market share down to an unstable level. Myspace was dealing with serious public image problems, various dysfunctional apps and products, and the its unwillingness to incorporate third party developers until it was too late. This drove down its market past its unstable equilibrium point as users of the site dropped dramatically after 2008. For the next three years, Myspace was losing over 40 million users per month. Since Myspace is a social network that thrives off of positive externalities, the loss of users at this rate was a death sentence.
http://www.huffingtonpost.com/2011/06/30/how-myspace-fell-apart_n_887853.html