Andrew Laffoon’s Thoughts

MySpace and Facebook are the biggest “social networking” sites on the internet today. However, they each perform different functions, have a different level of usability and command vastly different CPMs (”Cost per Milli” - cost for one thousand ad exposures). MySpace has over “75 million plus users, 15 million daily unique logins, 240,000 new users per day, and nearly 30 billion monthly page views (Techcrunch).” For the week ending July 8, traffic to MySpace accounted for 4.46% of all U.S. internet visits (Yahoo). This makes it the web’s biggest property, surpassing Yahoo and Google. In social networking, MySpace has almost 80% market share, while Facebook falls a distant second with less than 8%.

What is really amazing here is that MySpace, now the web’s largest property, is having amazing difficulty monetizing their users. On average, according to the New Yorker, MySpace only gets $.10 CPM for its page views (see InsideFacebook). In comparison, many blog authors make any where from $1 to $5 CPM for ads on their sites. Does the problem stem from social networking itself, or is MySpace doing a poor job monetizing its users? In a revealing comparison, the New Yorker article says that Facebook, with only one tenth the market share of MySpace, gets up to $4 CPM. That is 40 times the monetization per pageview as MySpace!

What does this mean? If you have used Facebook and MySpace, you know that Facebook has a number of benefits: it is far easier to use, the interface is more beautiful and the feature set is more simple. MySpace is cluttered, its user profiles are ugly and hard to customize, it is full of site errors, it does not remember your login effectively and it is really hard to navigate. Because MySpace takes so many more pageviews to do anything, it gets many times the page view number as Facebook. But even if each MySpace user generated 10 times as many pageviews as Facebook users (which they do not), Facebook would still monetize its users 4 times as well!

For more information on this, see MySpace: Unstoppable Force or Unnecessary Click Factory? by Mike Davidson.

RapLeaf is a great new system for managing reputations of buyers and sellers online — eBay’s reviewing system writ large. As the founders like to say, RapLeaf makes it “more profitable to be ethical.” I doubt this is one of the more common use cases, but I think their motto is exemplified in the case of the multi-million dollar deals that take place every day between venture capitalists and entpreneurs, where reputation really does translate into profit.

For a venture capitalist, reputation is everything. Reputation for a venture capitalist will mean drawing the best entpreneurs with the best ideas for the best price. In the Silicon Valley, reputation is driven primarily through word of mouth. Most of the time, an entrepreneur looking for funding will ask friends and contacts about the reputation of various VCs, but for a young entrepreneur with a small network, this may not be a feasible way to check out the reputation. The venture capitalist evaluating this young entrepreneur may have the same trouble. Because their networks do not directly connect, they know very little about each other.

RapLeaf has a brilliant solution to this problem. By allowing ratings based on transactions of all types, people will build up generic ratings that build trust before a personal relationship is established. This company can build rapport between people who have never met and were not personally referred. Of course, this will never supplant an actual relationship, but it allows connections that are not possible through sites such as LinkedIn. Making it “more profitable to be ethical” in this way will really add value to our daily lives, and I wish them the best in making their vision a reality.