MySpace is Dead

MySpace is Dead

I have long asserted that the prices paid for hot Web 2.0 properties are a little nuts. My belief is that they are only valuable because they the latest fad, but fads — by definition — do not last. Especially when the fad is amongst the most fickle consumer group — young people. Now I can add a little science, or at least economics, to prove my gut instinct.

Admittedly this is based on a very limited amount of knowledge. I am currently reading ‘The Undercover Economist’ by Tim Harford, a fantastic book that should be part of the national curriculum in every country. Few books give more insight in to the way the world works in so few pages. It explains the basic rules that govern the value of a company: their potential for earnings, and their scarcity.

Apparently most company’s shares come to rest around a price to earnings ratio of 16. So companies that are worth much more than 16 times their earnings must have great scarcity power.

I would argue that this is true of very few hot Web properties. They generally don’t do anything that could not be replicated or improved upon. And given the fickleness of the consumers they target, their long-term value has to be seriously questioned. Even revolutionary ideas like Skype seem to be losing some momentum — though the figures may not show it, certainly amongst my peers I have noticed a steep decline in its use. News Corp’s acquisition of MySpace may have been vindicated by the subsequent advertising deal it signed with Google, but MySpace most of all looks very vulnerable to its users departing for new pastures, notably Facebook.

I believe there are opportunities to create more lasting Web 2.0 ventures but they need to rely on more than novelty — they need scarcity power. If you can provide information and resources that are not available anywhere else, or at least are more difficult or expensive to find elsewhere, then you can create a lasting proposition — assuming you can maintain the scarcity.

Like any good scientist, I intend to test this hypothesis. Watch this space — I’ll be inviting readers to join the beta community.

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This article is by Tom Cheesewright. This post forms part of the Future of Business series. For more posts on this subject, visit the Future of Business page.

Tom Cheesewright

Futurist speaker Tom Cheesewright is one of the UK's leading commentators on technology and tomorrow. Tom has worked with a huge range of organisations across a variety of markets, to help them to see a clear vision of tomorrow, share that vision and respond with agility. Tom draws on his experience to create original, compelling talks that are keyed to the experience of the audience but which surprise and shock with unexpected facts and examples.

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