The Social Analyst is a weekly column by Mashable Co-Editor Ben Parr, where he digs into social media trends and how they are affecting companies in the space.
When a group of people starts discussing social media, it usually takes only a few seconds until it becomes a discussion about the most popular and widely used social media tools. Twitter, Facebook, and YouTube dominate the discussion today.
If you think a few years back though, it was a completely different story. At its peak in 2001, America Online — AOL — was a behemoth worth $240 billion. Now it’s not even worth $3 billion. MySpace, once the world’s largest social network, has seen its traffic plummet and 30 percent of its staff fired. They were the kings of their eras.
MySpace and AOL (and their execs) are facing similar challenges as they try to turn their respective companies around. What’s more interesting though is the similarities in their strategies and why their strategies are sound.
Recent History: MySpace and AOL
Before I dig into the similarities between the AOL and MySpace situations, it’s necessary to know how they got to this point.
Let’s start with AOL. In 2000, it bought media giant Time Warner for $184 billion. Take a moment to really think about the enormity of that number. It’s the worth of Twitter times 184. That’s enough to buy Apple, Inc. right now, with several billion to spare.
Right after the merger/acquisition though, AOL’s ISP and dial-up business went down the tubes, and so did AOL’s worth. Fast forward to this year, when we learned that AOL would spin off from Time Warner. Just a few days ago, the separation became official and AOL started trading on Wall Street. Its current market worth is $2.59 billion, 1/90 of what it was worth less than a decade ago.
While MySpace didn’t see its worth get cut in such dramatic fashion, its fall from grace is something for the history books. It launched in August 2003, got acquired in July 2005 by News Corp, and continued to grow. At least, until Facebook came into the picture. Fueled by college students and a savvy team that launched feature after feature, Facebook grew like a weed while MySpace’s growth completely stalled.
MySpace has been in crisis mode ever since. News Corp fired its CEO, removed the iconic Tom from management, and replaced them with Owen Van Natta, a former Facebook executive. MySpace is starting to stabilize, but it has resulted in a sizable hit to its web traffic and its staff.
The Evolution from Technology to Content
So what went wrong? While you can blame bad decisions (like completing the worst merger in history), that’s really not what doomed AOL or MySpace. No, what took these companies to the brink was the outdated technology they offered to consumers.
AOL’s core business in the ’90s was dial-up Internet, which was wildly profitable then. Now, it’s a joke. Cable Internet, DSL and wireless made AOL’s technology obsolete, and it wasn’t able to respond. MySpace’s social networking technology, while groundbreaking, was messy and limited. In retrospect, it had no chance against Facebook’s technology, especially news feed, the Facebook Platform, and Facebook Connect.
What some people don’t realize though is that both companies have already conceded defeat on the technology front. MySpace knows it won’t beat Facebook, and AOL knows that it won’t ever be the leading ISP again. Once they internally realized this, they began to evolve into content companies.
Let me explain what that means and how it’s quietly been happening:
AOL: While there were signs of AOL’s transition, the change really began when AOL bought blog network Weblogs (publishers of Engadget, Joystiq, and other blogs) and begun to build out an online news operation. Now, AOL has more than 3,000 freelancers and 150 full-time journalists. The still-popular AOL portal drives traffic to all of these in-house publications. They even moved their headquarters from Virginia to New York in order to help grow their advertising operation.
MySpace: Take a look at the Twitter stream for MySpace. You’ll find that it is now filled with music and celebrity content. Years ago, MySpace was about networking with your friends, but now the company is focused on entertainment channels such as MySpace Music, New Moon partnerships, and MySpace Music Videos. The biggest sign that they’re refocusing on content, though, is the news that MySpace may boast widespread Facebook Connect functionality by the first half of 2010. That would have never happened if MySpace still aspired to beat Facebook in social networking technology.
AOL and MySpace Have the Right Strategy
Each company has taken a different (but similarly bumpy) path to get to this point. The question now is: Will their strategies succeed?
Before even answering that, we have to define “success” for these companies. If you define success as these companies returning to their former glory, then you’re simply deluding yourself: MySpace and AOL will never regain what they once had. Instead, success should simply mean that they don’t crater any further and, in fact, begin a turnaround with slow but consistent growth.
Both companies have the right idea with their shift in strategy and focus. Instead of trying to attract new audiences with better technology (a losing proposition), bring them in by churning out content. Online content creation is in demand (more so with the rise of article sharing on social media channels) and each company has preexisting audiences that are not only consuming it, but helping share it to others.
MySpace and AOL are no longer technology companies; they are content companies. When they realized that they couldn’t win in technology, the switched. In my estimation, they are making the right moves to ensure that both companies don’t simply disappear or become the next BusinessWeek.
Reviews: Facebook, MySpace, Twitter, YouTube
Tags: aol, Ben Parr, content, facebook, myspace, The Social Analyst
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