Not Customers, Raw Materials

“Give Rupert Murdoch his due. When the News Corp. chairman approved a $580 million deal to acquire MySpace in the summer of 2005, he was way ahead of the pack… But now the pressure is building for MySpace to prove it can be the cash cow that Murdoch and others are betting on. MySpace, still by far the largest social network, has lost some of its mojo lately as competing networks spring up like dandelions after a rain shower, crimping its growth.

“Most important, social networks have yet to figure out a business model. Advertisers, for instance, aren't sure that social networks can become a great platform for their pitches. ‘Social-network advertising is still a work in progress,’ says Debra Aho Williamson, a senior analyst with research firm eMarketer.

“Murdoch's challenge is to transform the Web phenom into a digital media powerhouse capable of richly monetizing eyeballs without driving off the very users who made it popular. Even MySpace executives concede they're winging it. 'I don't think our monetization strategy will be a prize-winning Harvard Business School study,' says Jeff Berman, general manager of a new MySpace TV unit…

“Social networks have put most of their faith in advertising. But people don't go to MySpace to find products or information. Users are so engrossed with talking to friends and posting party pictures that they pay little or no attention to the ads. So ad rates on social networks are much lower than prices for search keywords or traditional ads… ‘Standard display ads -- and I don't care how much targeting you do -- it's not working well,’ says Ian Schafer, president of online ad firm Deep Focus.

“Media giants such as Warner Bros. and NBC have set up sites on MySpace to promote their content. But ad providers say some big consumer brands are leery of running ads beside material created by users. ‘Almost every single client we have says, “Do not run my ad on a social network”,’ says Tim Vanderhook, CEO of ad network Specific Media.

“MySpace is working to change that perception. It is rolling out a new system with computer algorithms that glean data about its users. That should produce ads that are more closely targeted to users' interests and make advertisers more eager to spend money on the site…

“Loading up on ads can backfire, though. MySpace already turns off some members by putting as many as nine ads on a page. ‘I really hate it,’ says Vinh Pham, a 24-year-old Web developer who now spends more time on Facebook than MySpace because of the ad deluge. ‘You have to see, like, 100 ads just to do anything on MySpace’."

(“In Search Of MyProfits; The pressure is on for Murdoch to turn MySpace into a cash machine.” By Spencer E. Ante, Ronald Grover, Heather Green, with Catherine Holahan in New York. Business Week: November 05, 2007. , Iss. 4057; pg. 23)

FOCUS: Customers pay you money; raw materials don't. Raw materials must be care-fully tended indeed. As you do so, customers pay for you to convert raw materials into something of value for them. What customers are willing to pay for is Priority One, not what the raw materials might become.

THE TEMPTATION here is to confound and reverse the two. Focus.