yumio.net Blog

There’s a lot of buzz about Facebook these days, and the stats point to a still dominant MySpace. http://www.techcrunch.com/2007/07/11/myspace-still-the-king/

One factor in their differences that I think is critical to their product direction is that Facebook avoided getting swallowed up by Yahoo! whereas MySpace became part of the Fox-NewsCorp empire.  And I think in small but strategic ways, you see that in the product updates and directions of these two companies. 

Whereas Facebook still operates like a startup and makes major strategic bets like opening membership up to the public and this whole apps platform direction, MySpace has certainly stagnated in the product strategy and features department.  Having been at Yahoo! I can just imagine the “product leaders” at MySpace having to go thru endless committee meetings, research, and bureacracy to change anything in their product, and certainly any major risky bets getting quashed since the main business is such a cash-cow. 

You can also see in MySpace’s international sites (I read Japanese & Chinese) that their “globalization” efforts are purely functional – as they just machine translated the UI and launched it without any real consideration for cultural/social dynamics in those countries.  I am willing to bet lots of yen that some ”not in the target demographic” exec at NewsCorp gave some strategic decision to enter those large Asian markets, without any consideration for the product aspects of entering those markets.

Anyhoo – hats off to Facebook & the Zuck machine for “just doing it” and a very wise decision not to get bought by Yahoo!

As I was buying a digital “gift” (aka icons) on Facebook for Caterina who just had her baby, I saw that the one I wanted to buy was a limited edition (100,000 only! Buy now!) and it cost $1.  I don’t know how many of these Facebook sells each month, but it is easily a side business with the highest margins since all you need is to hire a cheap graphic designer in China, and then some social network where giving this stuff is easy.  Then I remembered my Econ 101 days when I taught the undergrads the golden principle of modern economics P=MC (price = marginal cost).  Obviously this is in a perfect market, but its still interesting to think about the marginal cost of digital goods, since you’d think its close to 0.  Once you’ve uploaded that icon, it pretty much just requires that the servers continue to run so that 2 people can buy – send - receive.  So at $1 an icon – that’s a pretty nice profit margin, as long as you got that social network – of course.