Business Model Re-engineering
Date: November 4, 2011
Word Count: 3742
Nowadays, increasingly more industries, especially the media sector, are facing a continuous change. In the case of media, this is mainly a result of steadily developing digital technology. Even though a company’s business model might have been successful for many years, it suddenly can start to become weaker. The media market is quite competition-driven and hence a competitor with a new business model might alter the industry almost instantly (Business model re-engineering, n.d.). In such a competitive market, the “strategy […] is about being different.” (Eisenhardt & Sull, 2001, p. 116). This statement perfectly implies that companies and their products need to be so unique with such a well thought-out and innovate business model that they can create a competitive advantage. However, this adaption of the business model in an ever-changing media environment turns out to be quite a complex challenge, since now many companies face a decline of customers and revenue. A good example for a business model that could not survive the changing media environment in terms of online social networking is the one of Myspace. Consequently, I am going to propose a re-engineering of its business model. In this paper, I will focus on the problems of the current business model and carefully analyze the context of the market in order to propose a refreshed model that will help Myspace to survive and to compete more successfully in nowadays’ social networking market. Myspace needs a business model that provides value to its customers, guarantees a competitive advantage, as well as collects revenue (Teece, 2010). Myspace
Myspace.com, which was founded in 2003 by Chris DeWolfe and Tom Anderson (Piskorski, Chen, & Knoop, 2008), is an online social networking service that is now owned by Specific Media LLC and singer Justin Timberlake (Specific Media Acquires Myspace, 2011). Specific Media LLC is a media company which sells advertising online with a technology that aims at targeting specific customer segments (Specific Media LLC, 2011). Specific Media LLC, however, has not been the owner of Myspace for long. In June 2011, the company bought Myspace for about $35 million and as part of the deal pop star Justin Timberlake took an ownership stake (Specific Media Acquires Myspace, 2011). Before, from 2005 until 2011, it was owned by Rupert Murdoch’s News Corporation (News Corporation to Acquire Intermix Media, Inc, 2005). From 2005 until 2008, Myspace was the most popular social networking website in the world, as measured by the visitors. But the number of 75.9 million visitors per month in 2008 dropped to 34.8 million in May 2011 (Gillette, 2011). Problems
Is Facebook Myspace’s biggest problem? Since 2008, Myspace has been continuously losing members which was at the time when it was overtaken by Facebook (Mack, 2008). Myspace has been gradually losing its users which can be expressed by the declining members and visitors of the website. As from February 2010, the visitors decreased by 43.3 per cent (Arrington, 2011) and the members shrunk by ten million within one month at the beginning of 2011 (Stafford, 2011). This decline brings along a dramatic loss in revenues which are solely generated by advertising (Enders, Hungenberg, Denker, & Mauch, 2008). Facebook has now about 25 times more users than Myspace (Stafford, 2011) and it seems that members migrated from Myspace to Facebook, but there is other reasons for the failure of Myspace, mainly in terms of innovation.
Myspace was performing really well at the time of News Corp’s acquisition and it barely had any competitors. However, with the rise of its first great competitor Facebook, the former leading social networking site had to confront one of its severest lacks:...