MySpace: No Free Ride in Europe
Rupert Murdoch has hit pay dirt with MySpace. Since his News Corp. (NWS) bought the popular online social network last July, MySpace has doubled in value and recently closed a $900 million advertising deal with Internet powerhouse Google (GOOG). But while MySpace is the king of the hill in the U.S., growing overseas may not be as easy. Local and U.S.-based rivals are already entrenched in many European countries—and they're girding to do battle with the newcomer.
With more than 100 million users, MySpace has taken off in the U.S. by attracting a loyal following of young, Web-savvy consumers. Repeating that success in the big, fragmented European market won't be a cakewalk, analysts say. MySpace's competitors in Europe already have established themselves with local audiences, offering targeted content in native languages.
"MySpace is entering an extremely competitive market," says Stan Chudnovsky, general manager for California-based Internet company Tickle, owned by Monster Worldwide (MNST). "It must come up with new features to appeal to a European audience."
That could be harder than MySpace expects. Unlike the U.S., Europe's linguistic and cultural differences make it impossible for a one-size-fits-all approach to online social networks. What works in one country may not play well elsewhere. To its credit, MySpace is already adapting itself, launching a British version in April and its first non-English-language site in France in August. On Sept. 11, it unveiled its latest country-specific site in Germany.
MySpace aims eventually to roll out sites in other European countries, and later in China and India. The goal is to make each site as localized as possible, says Travis Katz, vice-president for international development. "For users, it should feel like my space, whether you're in Paris, Tokyo, or Dusseldorf."
To do that, the company is signing up popular local bands, adding native language videos, and staging events such as the popular "secret shows," where Indie and mainstream musicians play exclusive concerts for lucky MySpace members.
Yet in Britain, the European market most similar to the U.S., MySpace faces a tough fight for user loyalty. Though thousands of British users were registered on the main U.S. site before MySpace opened its British outpost, the company is now neck-and-neck with a little-known rival called Bebo.com. The California-based company was started in July, 2005, by a Brit who wanted to share digital photos with friends back home after he moved to the Golden State.
Flush with $15 million in funding from marquee venture firm Benchmark Capital, Bebo has more market share in Britain than MySpace, according to researcher Hitwise. (Figures from rival researcher comScore show MySpace with 32% more unique visitors in July, the most recent month tracked, and marginally higher page views, though Bebo's are growing faster.)
Bebo has built up a loyal following by turning its rival's business model on its head. Unlike the wide-open free-for-all on MySpace, Bebo only allows users to connect with members who are part of small communities—usually schools or universities.
By limiting who people can talk to, Bebo has found that users are spending almost two hours a day online getting to know their friends even better, compared to an hour-and-a-half on MySpace, where users divide their time among a much larger number of contacts. That could make Bebo particularly attractive to advertisers, who are looking for any advantage in the cutthroat world of Web 2.0.
Michael Birch, Bebo's founder, is now aiming even higher. He has recently launched music and video features that match those of MySpace, and he's also setting his sights on the U.S. In August, reports emerged that Bebo might team up with Viacom (VIA), whose deep pockets would allow a more serious challenge to Murdoch (see BusinessWeek.com, 8/11/06, "Will Viacom Remain a Wallflower?"). "The U.S. is our biggest challenge," says Birch, adding that he believes Bebo has already reached a critical mass there.
Britain isn't the only place where MySpace faces competition. Ringo.com, a photo-sharing site also owned by California-based Monster, still tops the social-networking rankings in France and Spain.
COOPERATION VS. COMPETITION.
Ringo has stayed on top so far by quickly tailoring itself to local audiences, with nimble content and marketing teams in each country that customize the site to different languages and tastes. There have been a few surprises along the way, says Boris Pfeiffer, Ringo's European general manager. In France, for instance, Ringo found that members use the site to share travel photos, while in Germany, people prefer to swap family snaps.
Unlike Bebo, Ringo isn't looking to challenge MySpace head-on. Instead, Pfeiffer sees the site working alongside MySpace in the future. As a site focused on photo sharing, Ringo already lets users link pictures to their MySpace pages. With its more specialized niche, Ringo argues that it can maintain its market share despite increased competition. "We don't see MySpace as a direct competitor," Pfeiffer says.
Other rivals are adopting similar niche strategies to survive MySpace's European push. Startup MyStrands, based in Barcelona, Spain and Corvallis, Ore., is a "music recommendation" site that blends social networking with music reviews to help its users find new tunes and share their preferences with others (see BusinessWeek.com, 9/11/06, "MyStrands Adds Music to Web 2.0's Mix"). And in August, Viacom's MTV Networks launched its own social-network site in Europe, called MTVFlux, that combines the company's music know-how with the interactive elements of Web 2.0.
Initially launched in Italy and Britain, MTVFlux allows users to create music playlists, talk to friends, and upload home movies, as well as vote for videos that will be played on a new MTVFlux channel. According to Gideon Bierer, MTV's senior vice-president of digital media, MTVFlux's music focus offers a "different type of experience than MySpace"—something he hopes will strike a chord with the site's young but fickle demographic.
Of course, MySpace isn't standing still. It's expanding its photo features, and on Sept. 1 announced plans to start selling music downloads. Its competitors have been put on notice that even their niche services are fair game (see BusinessWeek.com, 9/3/06, "MySpace's Musical End Run").
The battle is only beginning. "Europe remains a ripe market for expansion," says Alex Burmaster, European Internet analyst for Nielsen//NetRatings in London. With their head start, rivals have a chance of holding their ground in European social networking. But then again, look what happened to Friendster.