Why More Members, Money, and Ads Don’t Always Mean More Success: A B2B Marketer’s Survival Guide

Historical Lessons

There is an old adage that says “those who do not learn from history are doomed to repeat it.” So the question is–are there things that today’s B2B marketers can learn from history, specifically, the tremendous success of Facebook and the rise, fall and possible resurrection of Myspace?

My answer is certainly–yes! This question is particularly compelling today as we see Facebook set new records in terms of users, market valuation and revenue growth and wait with anticipation to see if Myspace can reinvent itself after conceding its market leadership position in social networking back in 2008. How can the respective histories and behaviors of these two companies inform the best practices for B2B marketers?

Background on the two social media sites

From its founding, Myspace took off like a rocket ship while Facebook had a much slower ascension from launch. The two companies were created six months apart; Myspace was founded in August 2003 and by July 2005 was bought by News Corp for 580 million dollars. In contrast, Facebook was founded in February 2004 and only took in its first outside funding of 12.7 million dollars from Accel Partners in May 2005.

In 2006, Myspace was the most visited U.S. social web site, surpassing Google in site visits. Myspace’s dominance would not last though. In 2008, Facebook surpassed Myspace in number of unique worldwide visitors and one year later claimed that title as well in the U.S. Myspace’s user base decline resulted in a tremendous loss in valuation; in fact, News Corp sold substantially all of its Myspace ownership in May 2011 for a rumored 35 million dollars.

Lessons

The differences in the birth, development, nurturing, growth and monetization of these two companies go a long way in explaining the reversal in their fortunes and the sustainability of their successes. These differences can and should provide valuable lessons for B2B marketers. These lessons include three main points: market to those of greatest relevance; create an atmosphere conducive to experimentation, new idea generation, & creativity; maintain relevance; and avoid rigid corporate structures.

A bigger user base is not always better

Myspace was created by Tom Anderson and Chris DeWolfe, two former employees of internet marketing company eUniverse. They had both been users of Friendster, which was initially a social networking service intended to maintain contacts and share online content and media. The Myspace founders saw both the potential of social networks and ways to improve on the Friendster offering and experience.

Myspace jump-started its subscriber base when they held a contest to see which eUniverse employees, who were the initial Myspace users, could sign up the largest number of users to the new Myspace website. This incentivized quantity over quality. Anderson and DeWolfe contacted 20 Million eUniverse users. Because of their campaign, thousands of users signed up for Myspace, and Anderson and DeWolfe began focusing exclusively on growing the social network.

But these users were not necessarily interconnected. Because those who signed up for Myspace did not know one another or had no reason to meet, then there was no ongoing incentive to use the website. What the Myspace founders and eUniverse CEO did not understand was that the most appealing aspect of a social network is that friends can connect or reconnect or share anything from photographs to experiences to news.

The importance of the Network Effect

Facebook, by contrast, started out as a social media outlet for Harvard. While Facebook started out with a far smaller prospective pool of users, specifically only 27,000 students, they all had reason to be interested in one another, thus creating an engaged and devoted user base. Because of the relevance, satisfaction and engagement with Facebook, users recommended it to their friends and other college students, creating a massive network of similarly aged, highly connected people with mutual interests.

This created a virtuous network effect which further increased Facebook’s relevance for its users. The takeaway lesson for marketers is that while it is important to get the word out, unless you are reaching qualified leads, it does you no good. Don’t send emails to everyone in your address book, rather, choose your recipients carefully. Don’t spray and pray. Choose the right market and create a strong connection and relevance to it; otherwise, you might have a lot of misleading nibbles but no fruitful bites. It is important to segment your data and your customers to better understand and access useful people who will find you useful.

Make customers happy before you worry about money

While Myspace probably thought it hit the jackpot with its 580 million dollar sale to News Corp, the sale might have actually been the seed of its downfall. Startups often focus on quality of product and a strong user base before monetization. While Myspace was still in startup mode when acquired, its high acquisition price and obligation to a public company created immense pressure to hit quarterly targets. It hastened the monetization process, which led to over-advertising and increased focus on making money, as opposed to focus on making the customer happy or the product better.

Due to the pressure to hit numbers and the fear of underperforming, Myspace was not as receptive to innovation or user input. Tinkering with the model, platform, or product would have led the company to new and unknown territory with customers, and Myspace couldn’t run experiments that didn’t predict sufficient user growth or enhanced profits.

In addition to putting pressure on Myspace to perform, News Corp designed a rigid business plan for Myspace, which hindered it from being more focused on enhancing user experience and satisfaction and slowing willingness to adapt and change.

Facebook, on the other hand, kept its ear to the ground, listened to user input and adapted accordingly. In fact, Facebook actively chose not to take the big payout and focused on developing its product. In 2006, Facebook turned down two large offers, the first from Viacom for 750 million dollars and the second from Yahoo at one billion dollars. Facebook has never been boring. If anything, people complain about too many new features and too many updates.

The lesson for marketers is that it is important to maintain flexibility and willingness to adapt and change and remain interesting and relevant. Listen to user input and feedback and don’t be afraid to change what you are doing. Your business plan can project 300 percent returns over one year, but that doesn’t do you much good if customers and prospects lose interest in your offering. Focus less on making money and more on making your customers happy–money usually follows.

The importance of targeted ads

Myspace was rolling in the dough–earning 800 million dollars in revenue in 2008. If you ever used Myspace back then, you would remember the amount of advertisements on your screen. However, they were more ad than content. The advertising was not interesting, or applicable, and hence would be very annoying.

Facebook, on the other hand, played the advertising game right, as it uses the information it has about you to create relevant and targeted ads. Facebook targets ads based on your profile, your likes, and information it gets about you from your Facebook friends. Generally, Facebook knows your age, location, education, relationship status, and more; Facebook would not push an ad to 18-25 year old males about the newest and hottest bras from Victoria’s Secret or Estee Lauder make-up, but rather, ads for the newest Michael Jordan sneakers would appear.

Facebook made it a priority to run directed, interesting, and relevant ads in appropriate quantities. Facebook has paid attention to how many ads get pushed to users without annoying them. One Facebook rep was quoted in an Edgerank Checker post in October 2012, saying, “we’re continually optimizing newsfeed to ensure the most relevant experience for our users.”

It is of the utmost importance as a B2B marketer to target the right people in the right quantities. It is not enough to have tons of ads on high traffic websites; you have to reach the right people on the right websites about the right subjects. To be successful, design your ads to be suitable to the people you want to be reading them, and put them in the right places for the right people.

An image of Myspace inbox screen with advertising ranging from a spammy new scientific way to lose weight and free credit reports, to sour candy

Continued success and an attempt to rejuvenate

Facebook went public in May 2012 at a then record valuation of 104 billion dollars. After some minor hiccups at the start, it now trades at a 220 billion dollar valuation. This past quarter alone the company’s revenue grew around 61 percent to nearly 3 billion dollars. The company now has over 1.4 billion users.

In late 2013, Myspace users numbered approximately 36 million–less than half the number of unique users Myspace had at its peak in Late 2008. Necessity, rather than creative destruction, recently forced Myspace to reinvent itself into a social entertainment website when it was jointly purchased from News Corp for $35 million dollars by Specific Media and Justin Timberlake. They have revamped Myspace into a music sharing website which they hope will have value and relevance to producers, artists and even casual listeners.

While the original Myspace had an element of music sharing, the current strategy clearly is a re-visioning of the company. Although too early to deem the strategy successful, the company seems to be headed in the right direction.

Myspace’s story and history illustrates the importance of admitting failure and moving on by learning from past mistakes and being willing to let go of old ideas. Vinod Khosla, a successful and well-known Silicon Valley entrepreneur, has been quoted as saying, “Most entrepreneurs–good entrepreneurs–are just not afraid to fail… the ability to think outside the box is the Silicon Valley mindset.”

For B2B marketers, it is important to remember if a specific campaign, article or eBook does not succeed, or even gets negative feedback, and to learn from that failure or feedback and respond accordingly.

Why More Members, Money, and Ads Don’t Always Mean More Success: A B2B Marketer’s Survival Guide