With Facebook raising another $500-million (a move that raises its valuation to a staggering $50-billion), one of the issues raised is the future of MySpace.
Could Facebook’s new financing help MySpace find a potential buyer? Or does it mean Facebook is so strong that MySpace’s already-fading prospects have become even more bleak?
If we run with the second scenario, it thrusts the idea of industry consolidation into the spotlight. After several years of strong growth, healthy competition and lots of start-ups, many social media markets have well-defined leaders with big chunks of the market.
The gap between the leader and second-largest player in many market is fairly wide, and then the gap between everyone has is enormous. This has not stopped start-ups from thinking they can come up with a better mousetrap – just look at the number of social social networks such as Diaspora, as well as the niche social networks that continue to emerge.
While reduced start-up and operating costs have lowered the barrier to entry in many markets, the reality is bubbly (maybe even frothy) investment landscape and the economic realities of relying on advertising are going to come home to roost for start-ups trying to gain footholds in markets where there is a dominant player.
These start-ups may, in fact, create a better mousetrap but unless they are significantly better or really unique, the chances of capturing the spotlight are fairly slim.
As social media matures and evolves, consolidation will become a fact of life. The number of companies that will fade away or merge will start to increase. It doesn’t mean start-ups will disappear (just look at the search engine start-ups that continue to battle Google) but could see fewer players in markets such as social networks.
Tags: consolidation, facebook, myspace, Social Media
Mark,
What’s the “so what” here? Most every market consolidates over time. Hey, even Sysomos was the beneficiary of market consolidation in an emerging market segment.
I must say that I find your blog posts and your G&M posts extremely trite and banal and bereft of real insight or analysis. Read over this post again and tell me what the key takeaway or insight is for any of Sysomos’ customers?
So, let’s consider the “so what” here. As mentioned, markets generally consolidate over time but then fragment or re-segment as new technologies or market opportunities arise. For example, the market for “social networking” may, in fact, be consolidating; though, in reality, there are still hundreds of millions of active users on other social networks such as Hi5, Friendster, MySpace, Orkut and so on.
However, the more interesting question is how will the social networking market fragment or segment over time. For example, Tagged is focusing on “social discovery” rather than social networking. Quora is developing an interesting social interaction network around Q&A. Path is trying to develop a new social layer focused on a more closed and private network for sharing media and personal content.
These are but a few examples. The “so what” of this post should be that social networking is reaching a point of fragmentation, redefinition and segmentation as user needs and behaviours change, new technologies emerge and the large players fall victim to the “innovator’s dilemma.”
James,
Thanks for the comment. I guess my response would be that not every post needs to have a “so what”, although providing insight is always a good thing. Some posts are simply commentary on the news or trends.
cheers, Mark
I took your article as a small informative article, both the article and James comment, got me thinking about how the overall social network is behaving.
This is interesting to contrast with Liz Gannes’ recent take on the social space, in which she argues people are beginning to use more services, not fewer, and to make more of the relative strengths of different social platforms.