Facebook v. MySpace In The U.S. Market: The Music Factor

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Daily Crunch: Box Hop Edition

Facebook is now the largest social network in the world. But they continue to trail MySpace by a massive 36 million users in the U.S., and at current growth rates it will take them 18 years to overtake them.

Most of Facebook’s growth is international, where they’ve executed on a brilliant strategy for quickly rolling out localized versions of sites by getting their users to do the translation work for them (MySpace, by contrast, expands via a command-and-control infrastructure that puts people on the ground in each new international market). But the commercial value of some of those international users is far less than the U.S., the UK, Japan and a handful of other countries with robust online advertising markets.

Is Music Perpetuating MySpace’s Lead In The U.S.?

Music is MySpace’s territory. They host millions of artist and band pages, and one of the first things any new band does is create their MySpace page. MySpace says 35 million people per month visit their music sites, including MySpace Music and various artist pages. Some artists have millions of “friends” and the pages allow streaming music, artist control over the look and feel of the site, etc.

Facebook, by contrast, has no real internal music strategy. Artists can set up Pages to promote themselves, but the pages are no different to any other fan pages (for example, no streaming music) – there is nothing music or artist specific on the site.

Next month MySpace is rolling out a new music joint venture with the major labels that will have music streaming, playlists, downloads, merchandise sales, ring tones and other features. It’s not only likely to be a major destination site for music but also a significant revenue driver for MySpace and the labels (a little may trickle down to the artists as well).

Music is a huge part of what drove historical MySpace growth, and I believe it is a major factor in perpetuating their lead over Facebook in the U.S. market.

Facebook’s Response To MySpace Music: iLike

Facebook doesn’t appear to be engaging in any direct music strategy at all. Instead, they’ve placed their bet on iLike, a third party application that has no streaming deal (they piggyback on Rhapsody). Last month Facebook announced that they’ll give iLike special access to Facebook through their new Great Apps program. All official and most off record messaging we’re hearing is that iLike is Facebook’s music partner for the long run.

We’re big fans of iLike. But Music is such a big category that is so completely dominated by MySpace, that it seems like they should have their overall music strategy under their direct control. Today, Facebook users who want to stream music must do so via a contractual maze that goes from the labels to Rhapsody to iLike to Facebook. Meanwhile I can’t visit a MySpace page without being attacked with streaming music.

At its core Facebook is still a generic social network that, through the social graph, provides an easy way to connect with friends. MySpace by contrast has the social graph as well as a huge footprint in the music world. That not only provides a reason to go to the site, but provides a nice business model as well.

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