Wednesday, April 11, 2007

Blocking Photobucket: not as stupid as you think

This post is a response to my friend Ravi Mishra's post entitled MySpace's Doom as well as parts of Ravi's Open Letter to MySpace and News Corp. You should tune into his blog for some very on point tech related thoughts, Ravi tends to cover some of the juiciest and cutting edge deals happening in the valley.Onward to my response and dissenting view:

Although i full heartedly agree with the underlying points that you are making about electing an open architecture from a tech and business perspective, i do think that MySpaces actions are not as foolish as you are making them out to be. Here is why, i think MySpace is being wise in blocking certain services in order to maintain their lead:

First of all, lets not forget that MySpace is no stranger to embracing an "Open" approach and allowing its users many degrees of freedom for customizing and shaping MySpace. The whole MySpace widget economy ( e.g. Youtube, Revver, Rockyou, photobucket, slide, etc) exists because of MySpace's and even FIM's relative acceptance of the fact that they are or better said were an "open" service.

However now that they are at the top the rules of the game have changed. In order to sustain their leadership MySpace needs to make sure to:
1) Drive a sustainable and large enough revenue stream via advertisement
2) Make sure that the quality of the content and the userbase remains intact. Meaning that the ratio of Signal to Noise in this network needs to favor signal as much as possible (e.g Have real private messages and comments vs robot spam)

So as Ravi mentioned the Photobucket example is a great case study of how MySpace plays with the 3rd party services that have sprung up on its back. On one hand MySpace clearly enjoys a lot of benefits of having Photobucket as an add on service to their network. On the other hand Photobucket is getting very aggressive and desparate enough to try to monetize their own service by cutting into MySpace's slice of the pie. Photobucket started embedding ads into their content into MySpace directly, they are competing with MySpace for the users attention. MySpace tends to not block widget makers who do not advertise on their site or try to lead the users away from myspace to their own service. So lets examine what would happen if MySpace did not block Photobucket and let them continue with showing ads within their embeddable content:
1) Photobucket would eat away at MySpaces own ad revenue and impact click through rates of MySpaces inventory
2) Allowing an ad based revenue stream within embeddable content would spur dozens of other start ups to pursue such revenue. Imagine if Photobucket got away with this, then every photohosting, slideshow making, chat providing service would put ads in their content thus decreasing the value proposition of such content to the end users themselves
3) The ratio of Signal to Noise would drastically shift towards more noise as more services would jump into the ad supported camp and start spamming myspacers to use their service.

So all in all my conclusion is that MySpace can not afford to just "Open" up if MySpace had an open API like Facebook then the quality of their network would go down from barely acceptable to complete spam. (also note Facebook objects to you leveraging their API to make money).

What MySpace should do IMHO is take a leaf out of Carrier playbooks. Meaning invest in and open up a developer program/Widget developer support process. This way they would have much more control over the process as well as they could impose rev sharing arrangements much like the carriers do with Premium SMS and other on deck content. In essence MySpace is a destination portal and a communication medium rolled into one (analogous to Cingulars media mall, or Verizons Get it Now) so they should develop a clear cut program for 3rd parties to be able to innovate new specific features and services and in exchange for rev sharing have their service or feature be promoted "on deck" with myspace.

Maybe i just have too much of a mobile oriented perspective?

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