Business Model Re-Engineering: Myspace

————————————————- Business Model Re-engineering MySpace Date: November 4, 2011 ————————————————- Word Count: 3742 Introduction Nowadays, increasingly more industries, especially the media sector, are facing a continuous change. In the case of media, this is mainly a result of steadily developing digital technology. Even though a company’s business model might have been successful for many years, it suddenly can start to become weaker. The media market is quite competition-driven and hence a competitor with a new business model might alter the industry almost instantly (Business model re-engineering, n. d. ). In such a competitive market, the â€Å"strategy [†¦] is about being different. † (Eisenhardt & Sull, 2001, p. 116). This statement perfectly implies that companies and their products need to be so unique with such a well thought-out and innovate business model that they can create a competitive advantage. However, this adaption of the business model in an ever-changing media environment turns out to be quite a complex challenge, since now many companies face a decline of customers and revenue. A good example for a business model that could not survive the changing media environment in terms of online social networking is the one of Myspace. Consequently, I am going to propose a re-engineering of its business model. In this paper, I will focus on the problems of the current business model and carefully analyze the context of the market in order to propose a refreshed model that will help Myspace to survive and to compete more successfully in nowadays’ social networking market. Myspace needs a business model that provides value to its customers, guarantees a competitive advantage, as well as collects revenue (Teece, 2010). Myspace Myspace. com, which was founded in 2003 by Chris DeWolfe and Tom Anderson (Piskorski, Chen, & Knoop, 2008), is an online social networking ervice that is now owned by Specific Media LLC and singer Justin Timberlake (Specific Media Acquires Myspace, 2011). Specific Media LLC is a media company which sells advertising online with a technology that aims at targeting specific customer segments (Specific Media LLC, 2011). Specific Media LLC, however, has not been the owner of Myspace for long. In June 2011, the company bought Myspace for about $35 million and as part of the deal pop star Justin Timberlake took an ownership stake (Specific Media Acquires Myspace, 2011). Before, from 2005 until 2011, it was owned by Rupert Murdoch’s News Corporation (News Corporation to Acquire Intermix Media, Inc, 2005). From 2005 until 2008, Myspace was the most popular social networking website in the world, as measured by the visitors. But the number of 75. 9 million visitors per month in 2008 dropped to 34. 8 million in May 2011 (Gillette, 2011). Problems Is Facebook Myspace’s biggest problem? Since 2008, Myspace has been continuously losing members which was at the time when it was overtaken by Facebook (Mack, 2008). Myspace has been gradually losing its users which can be expressed by the declining members and visitors of the website. As from February 2010, the visitors decreased by 43. 3 per cent (Arrington, 2011) and the members shrunk by ten million within one month at the beginning of 2011 (Stafford, 2011). This decline brings along a dramatic loss in revenues which are solely generated by advertising (Enders, Hungenberg, Denker, & Mauch, 2008). Facebook has now about 25 times more users than Myspace (Stafford, 2011) and it seems that members migrated from Myspace to Facebook, but there is other reasons for the failure of Myspace, mainly in terms of innovation. Myspace was performing really well at the time of News Corp’s acquisition and it barely had any competitors. However, with the rise of its first great competitor Facebook, the former leading social networking site had to confront one of its severest lacks: innovation! At the very beginning, Facebook entered a niche market, namely the one of college students. Firstly, it was available to Haravard students, then more and more universities wanted to join Facebook and today, almost everybody is using this social network, no matter if college student or not (Piskorski et al. , 2008). Today, around 600 million users enjoy keeping in touch with people all over the world via Facebook (Cauwels & Sornette, 2011). Facebook managed this great success because it was innovative. New features have been added all the time since it has been launched, hence people were involved and kept coming back as a result of new innovations such as the ‘news feed’ at that time (Stafford, 2011). While Facebook managed to be innovative all the time, Myspace failed to adapt to the market and did not add new features as Facebook did. Additionally, Myspace did not allow third party developers to create new features such as applications (e. g. Facebook – FarmVille etc. ), they rather kept everything behind closed doors. Therefore, Myspace lost the competition of controlling the market at the time between 2006 and 2008 and consequently it became boring (Stafford, 2011). Even though Myspace had certain features, they did not all work very well. For example, members were able to create their own backgrounds either themselves or they could download an existing design from many providers who specialized in creating Myspace profile designs. This feature turned into quite a mess, problems, and confusion regarding certain profiles. The whole competition resulted in a confusing mess and one could not be sure on what Myspace was focusing. Not only because of the customized user profiles but also because of some other flaws in the site’s design, Myspace was confronted with security issues. Results were spyware (Hesseldahl, 2006), phishing, and spam (Webb, Caverlee, & Pu, 2010). Another security fear was regarding the profile content. Users were concerned about trust and privacy and even law enforcement officials claimed, â€Å"MySpace is used by sexual predators to lure teenagers† (Dwyer, Hiltz, & Passerini as cited by Schrobsdorff, 2006, p. 5). The last problem I want to focus on is the revenue model. As previously mentioned, Myspace operates on revenues from advertising. Especially under the ownership of News Corp, the main focus was on generating revenue. It seemed that Rupert Murdoch solely focused on revenues and nothing else which is a great flaw for a social networking site, as it needs to focus on the onsumers. In 2006, Google pledged to pay News Corp as many as $900 million over three and a half years and in return Google was allowed to provide search services and advertising on Myspace (Piskorski et al. , 2008). For Myspace’s customer it seemed that the site was full of too much unorganized advertising, hence the website appeared unp rofessionally (James, 2009). The previously listed problems of Myspace are mainly problems of the time when Myspace lost the competition against Facebook, and reasons why Myspace is not successful anymore. With regards to the Business Model Canvas by Alexander Osterwalder (2009), I will focus on the problems based on the following elements: Value Propositions, Key Partners, Revenue Streams, and Media Channels. The element of value propositions â€Å"seeks to solve customer problems and satisfy customer needs with value propositions† (Osterwalder & Pigneur, 2009, p. 16). I consider this part to be Myspace’s greatest problem regarding the issues of trust, privacy, spam, spyware, and phishing. Furthermore, the lack of innovation was one of the major problems why Myspace lost that many users who constantly want to experience something new. With its lack of good and new features as well as its unclear point of focus, Myspace was not able to deliver value which would result in customers continue to use the social network. From my personal experience, I can say that Myspace faded into obscurity which can be backed up by the low number of users now, compared to the time of 2006 when Myspace was at its peak (Snyder, Carpenter, & Slauson, 2006). I was a Myspace user around 2006 as well, when I was 15 years old. It seemed to be a meeting point for teenagers and for me it was not any different from the German social networking site ‘Schuler VZ’ except that it is international. However, as time went by, I decreasingly used Myspace as for me it always was too confusing and it could not compete with the German social network. Besides, I got spammed with advertising, random men (who were not at my age) thought it was a dating service, and it simply became boring. Therefore, I can state that Myspace’s biggest problem is that it is not valuable enough for the users. Theory Firstly, I will focus on the value propositions as all the other elements, I chose to focus on, follow up on the value propositions. When looking at value propositions, I would like to consider the three types of value propositions according to Anderson, Narus, and van Rossum (2006), namely ‘all benefits’, ‘favorable points of difference’, and ‘resonating focus’. In the case of Myspace, it certainly would not be enough to â€Å"simply list all the benefits† (Anderson et al. , 2006, p. 2) since there are too many competitors in the Internet environment that share most of the benefits and values. The ‘favorable points of difference’ approach is promising in so far that it distinguishes the valuable points that the competitors do not offer. However, I believe that Myspace does not present many highly valuable aspects over their competitors and therefore it would be most convenient to concentrate on the ‘resonating focus’. With this approach, I will focus on â€Å"the one or two points of difference [†¦] whose improvement will deliver the greatest value to the customer for the foreseeable future† (Anderson et al. , 2006, p. 4). In connection to that, I will of course need to study the greatest competitors with regards to their value propositions in order to highlight Myspace’s most valuable points of difference. Furthermore, I will need to research what customers expect from online social networking, what they value about Myspace, and what they generally find lacking in the social networking environment in order to develop ideas for a possible niche market. Additionally, for this customer value research, I will need to conduct research on focus groups with regards to problems mentioned in the previous section (safety and innovation). Furthermore, the design is an important aspect of the value propositions as well. As I previously stated, the old Myspace design was quite confusing which resulted in safety problems. Hence, a new design is needed which is unified for every user, yet attractive and which does not allow bugs. Secondly, in relation to innovation, I will need to look at the Key Partners who will be part of the re-engineering of the Media Channels as well and concerning revenues. Through Media Channels, the company can communicate with its customers and deliver the value propositions (Osterwalder et al. 2009). Especially in the online environment, awareness can be raised with the help of other key partners. For example, you can share content from one website on another. Not so long ago, Myspace introduced connection opportunities to Twitter and Facebook (Myspace introduces mashup with Facebook, 2010) and also youtube allows sharing videos on myspace. Myspace’s connections to Facebook which will al so help to generate user-specific streams according to the user’s Facebook profiles. However, Facebook for example, does not allow a connection to Myspace. Accordingly, Key Partners are needed that would help promoting Myspace. Moreover, the former revenue model which only consisted of advertising, has proven to be quite annoying for the users, hence Myspace needs Key Partners who will not only make the website more appealing but also help to make revenue. Hence, research has to be done on Key Partners who are willing to help financing Myspace as well as who would be interested to offer for example applications (which then help the Key Partners as well). As I said before, Myspace faded into obscurity. For this reason, I will also need to look at other media channels such as campaigns and marketing strategies in order to bring Mypsace back to people’s minds. In that relation, research needs to be done on what marketing strategies worked for successful social networks such as Facebook and also what media channels can help to basically re-introduce a media product like Myspace. Assumptions & Best Practices Review First of all I need to mention that Myspace decided in 2010 to focus on music and entertainment (About Myspace, 2010). However, for now I will only consider online social networking sites as websites that focus on music and entertainment are not Myspace’s greatest competitors. Of course, I will need to take Facebook into account as Myspace’s greatest competitor and as today’s most popular social network which was the most visited website in June 2011 (Smith, 2011). Facebook first started in a niche market of college students and it got awareness from the very beginning. It did not use any special advertising campaigns to become popular but the promotion was rather by word to mouth (Mitchell, 2009). The popularity has then been covered by newspaper articles and television which reported on the success (Ibid). Mark Zuckerberg launched Facebook as a unique and intimate website and constantly added new features that kept the site interesting. Facebook is far more innovative than Myspace and therefore the members keep using it and promote it by word-of-mouth advertising. Similarly to Facebook, Twitter was initially successful in a niche market. At the beginning, primarily computer- and technology specialists as well as bloggers used Twitter for example to promote their blogs (How did Twitter become popular? 2009). Twitter could convince with its simplicity and real life experience. Real life experience in so far that people twittered news from certain events such as the Mumbai attacks or recently the uprisings in Tunisia as different to regular news channels (Ibid). The best practices that made Twitter and Facebook successful and popular are therefore word-to-mouth advertising and t he Internet itself. Word-to-mouth advertising only worked because of the convincing and interesting designs and usability. Both platforms are innovative, as they have been creating new features that make them enjoyable, flexible and interesting (The Success of Twitter, 2011). Those best practices worked for Myspace as well – in the beginning. However, the task now is to remake Myspace aware to people’s minds and the goal is that the users actually keep using Myspace because of the new design and value propositions. I would suggest sending a short and catchy email to the Myspace users which shortly introduces them to the new Myspace. Users might want to get to know the new Myspace and then tell people about their good experience. Additionally, since Myspace is focusing on music, an advertising campaign might help to make new bands aware of Myspace’s ability to promote their work. Facebook uses an aggressive innovation approach, meaning that it comes up with new features that users initially might not like but after a while they cannot imagine Facebook without those new features anymore. Furthermore, Facebook constantly adapts the privacy settings in order to meet the customers’ needs with regards to safety (Blodget, 2010). Innovation keeps Facebook interesting and worthwhile to continue using it. Another highlight it offers for their users are applications. Many software developers create applications for Facebook which make the site not only more interesting and entertaining but also help to generate revenues (Stone, 2007). With the help of key partners, Myspace can get help for its design as well as applications that help to make the site interesting. What is more, key partners help financing; hence Myspace would not only be dependent on advertising revenues. As users find the amount of advertising quite annoying, Myspace can focus on less but personalized advertising. Those steps would help to make Myspace more innovative and it can easier meet the users’ needs in terms of design, safety, new features that make it worth to use. Research Proposal – Method Myspace needs change! More specifically, Myspace needs a re-engineered business model. The previous statistics show that the numbers of Myspace users decline gradually. If this decline continues, the once most popular social network (Bains, 2009) will soon be almost unknown or at least unused. However, with further research on my previously stated ideas based on the problems of Myspace in relation to the Business Model, I will be able to help Myspace creating a new and innovative Business Model that will help to avoid further declining user numbers and to create competitive consistency in the environment of social networking. In order to study the value propositions carefully, I will conduct qualitative research. Only with qualitative research I will be able to gather in-depth understanding of the reasons why people do not use Myspace anymore. I can gather such information in two ways: through interviews and through an online research community. With the help of a qualitative research interview I will gather the facts as well as analyze the meaning (Kvale, 1996). As a result, I will be able to understand the values customers need as well as the reasons and problems which caused the failure of Myspace. By using an online research community, Myspace can put â€Å"the customer at the heart of [the] marketing strategy† (Simon, 2009). Such research communities allow efficient and deep qualitative research online. In such a community, members can discuss certain aspects such as new features and designs, and Myspace can adapt accordingly. Besides, a qualitative research online will probably bring more results since people rather take the time to discuss issues online. However, the qualitative Interview will also be needed because it is an additional in-depth analysis with face-to-face communication that enables immediate follow up questions and answers with high reliability. The qualitative research of both forms will be base on current or former Myspace users and also on general social network users in order to determine the general arget group’s values. Questions for both kinds of researches will for example include what they currently like about Myspace, what they do not like, why they use Myspace, or why they (stopped) using Myspace, what they generally value about Myspace, and their opinions about the competitors such as Facebook. For good measure a detailed research on the competit ors and their best practices is essential. This can be done by further online research on the competitor’s strategies in order to find out what could work for Myspace as well. Plan The following table provides an overview of the estimated time and costs for this project – subject to modifications. For now, I will conduct the research for three weeks, meaning that for example that the online community will be run for three weeks. Part| Time| Costs per hour| Costs per day| Creating online community(5 employees)| 8 hrs| EUR 10 (x5)| EUR 400| Leading discussion online(10 employees)| 3 wks (120 hrs)| EUR 8 (x10)| EUR 9600| Analyzing online community (10 employees)| 2 wks (80 hrs)| EUR 12 (x10)| EUR 9600| Developing questions for both onliny community and interview (4 employees)| 8 hrs| EUR 12 (x4)| EUR 384| Interviews (5 hrs per day)(10 interviewer)| 3 wks (75 hrs)| EUR 12 (x10)| EUR 9000| Evaluation Interview(10 employees)| 2 wks (80 hrs)| EUR 12 (x10)| EUR 9600| Total Costs for staff:| EUR 38584| Further costs: Possible travel costs (for interviewers):ca. EUR 300 Equipment (for Interviewers – recorders etc. ):ca. EUR 400 Technical equipment for online community:ca. EUR 10000 Total Costs:ca. EUR 49284 The additional costs might not apply if the equipment already exists. All prices are including value added taxes. Reflection In this paper I laid the foundation for a re-engineering of Myspace’s Business Model. Back in 2006 and 2007 I was a member of Myspace as well. However, I never liked this social network much since it was confusing, annoying because of all the advertising and I did not feel safe using it. Overall, it did not really work out. Now I am a Facebook user and I totally forgot about Myspace. Apparently, other social network users feel the same way which can be expressed by the declining number of Myspace users. Myspace became quite unpopular, fewer and fewer people visit that site and Facebook out-competed Myspace fast. Therefore I analyzed the problems that resulted in the failure of Myspace. The main overall problem is innovation. Myspace failed to add new features in order to make the platform interesting and worthwhile to keep using it. Myspace totally faded into obscurity wherefore it is essential to re-engineer at the media channels. Also, Myspace did not allow third party developers to help designing the page and add for example applications which not only would make the network more entertaining but also help generating revenues other than advertising. Instead, members were able to design their own profiles. This feature, however, resulted in an overall confusing design and safety problems. Safety problem arose from the bad software as it was easier to install for example spyware. Myspace could not meet the values that the customers need. Aside from bugs such as spyware, spam and phishing, users experienced a great lack of trust and privacy in that online network. To sum it up, I focused on the re-engineering of the following parts of the Business Model Canvas by Osterwalder and Pigneur (2009): Value Propositions, Media Channels, Key Partners, and Revenue Streams. All parts of the business model are connected though. That is why I analyzed all parts with regards to the others. My idea is that Myspace needs to be innovative. It can do so in analyzing both the values of customers and the best practices of the competitors and then adapt accordingly. With this method, Myspace can add new feature that will surely meet the customers’ desires. This is connected with a new design and key partners. Key partners can not only help with the design but also with innovation by adding applications that make Myspace more interesting. Furthermore, key partners would create another method of generating revenues. Then, Myspace would not only depend on advertising revenues and can reduce the annoying advertising to unostentatious, user-personalized advertising. After its changes, people need to be made aware of the new Myspace. This can be done with a short and catchy email to Myspace members who will then positively experience the re-engineered Myspace and spread the word. Additionally, television and Internet advertising campaigns might help to bring Myspace to the people’s minds. I am convinced that those methods and the further research, suggested in form of qualitative interviews, qualitative online community research and qualitative research on the competitors, would help Myspace to survive the competition in the online environment of social networks as well as stop a further downfall. References About Myspace. (2010). Retrieved November 1, 2011 from Myspace http://www. myspace. com/pressroom/2010/11/myspace-introduces-mashup-with-facebook/ Anderson, J. C. , Narus, J. A. , van Rossum, W. (2006). Customer Value Propositions in Business Markets. Harvard Business Review. Arrington, M. (2011, March 23). Amazingly, MySpace’s Decline is Accelerating. Retrieved October 29, 2011 from http://techcrunch. com/2011/03/23/amazingly-myspaces-decline-is-accelerating/ Bains, L. (2009). Facebook Overtakes MySpace as Most Popular Social Networking  Site. Retrieved November 2, 2011 from http://www. switched. com/2009/01/27/facebook-overtakes-myspace-as-most-popular-social-networking-sit/ Blodget, H. (2010). Ignore The Screams–Facebook's Aggressive Approach Is Why It Will Soon Become The Most Popular Site In The World. Retrieved November 2, 2011 from http://articles. businessinsider. om/2010-05-17/tech/29991115_1_ceo-mark-zuckerberg-facebook-s-pr-innovation Business model re-engineering. (n. d. ). Retrieved October 27, 2011 from AMR International http://www. amrinternational. com/services/corporate_and_business_unit_strategy/business_model_re-engineering Cauwels, P. , Sornette, D. (2011). Quis pendit ipsa pretia: facebook valuation and diagnostic of a bubble based on nonlinear demographic dynamics. Retrieved October 30, 2011 from Cornell University Library http://arxiv. org/abs/1110. 1319 Dwyer, C. , Hiltz, S. , Passerini, K. (2007). Trust and Privacy Concern Within Social Networking