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MySpace could lift ban on commerce

INTERNET

Members can't peddle their wares on the social networking site. But that could change if it can profit from sales.

August 27, 2007|Joseph Menn | Times Staff Writer

Christine "Forbidden" Dolce, Tila Tequila and Bobbi Billard each have accumulated more than a million admirers on MySpace.com, making them among the handful of most popular people on the world's most popular social networking website.

That may have something to do with the amount of skin they show on their MySpace pages. More obscured than their bawdy photo galleries, however, are their attempts to cash in on their online fame by using MySpace as a storefront to sell perfume, poker and soft-core porn.

The cyber pin-ups can't come right out and peddle their wares because MySpace officially bans most commerce. But any suitor would have little trouble finding online pathways to the three hotties by following "hints" they drop on their MySpace pages.

And these detours are the subject of intense debate at MySpace, Rupert Murdoch's prized Internet property.

MySpace bans commerce between its members because it doesn't want to jeopardize the corporate advertising that accounts for the vast majority of its profit. Allowing its members to promote their wares would only clutter up the place.

"We don't want users' pages to start looking like NASCAR," MySpace Chief Executive Chris DeWolfe said.

But behind the scenes, the issue is being hotly discussed as DeWolfe and his team of top executives at the biggest property within News Corp.'s Beverly Hills-based Fox Interactive Media grapple with the imperative of squeezing more money out of MySpace. MySpace doesn't want to encourage the likes of Dolce, Billard and Tequila. But its ban on commerce is difficult to enforce. If the policing efforts fail, shouldn't it at least try to make money from the online sales it makes possible for others by taking some sort of a cut?

Murdoch, the News Corp. chairman who paid $580 million for MySpace's parent company in 2005, said this month that he wanted to drive up Fox Interactive profit by a factor of 20. Fox Interactive brought in $10 million in profit on sales of $550 million in the fiscal year ended June 30, but Murdoch said Aug. 8 that he would be surprised if that didn't jump to at least $200 million on sales of $1 billion in the year just begun.

While Murdoch is applying pressure from above, Facebook.com is rising up from below. Since the rival networking site dropped restrictions preventing anyone other than students from becoming a member, its registered-user rolls have soared far faster than those of MySpace. Facebook has fewer restrictions on advertising and person-to-person sales, forcing MySpace to reexamine its own practices. But MySpace can't afford a permissive policy for commerce if it comes at the expense of corporate advertising, its lifeblood.

"We would be foolish not to focus the majority of our time, from a revenue standpoint, on optimizing our ad products," DeWolfe said, pointing out that as the "highest-trafficked site on the net" in terms of page views, MySpace is well positioned to tap into an online advertising market that is projected to soar to $40 billion in 2011.

On the ad front, MySpace is making great strides.

The company has focused on serving up better videos and interactive features to keep visitors on the site longer, giving them more opportunities to look at ads. MySpace does custom ad campaigns that include creating tricked-out brand profiles and contests, with price tags that can run into the millions of dollars. A recent profile page and ads for the movie "Superbad" spurred 1.5 million viewings of the trailer, executives said.

Meanwhile, a software team has been charged with targeting ads to MySpace users based on registration data such as their age and location as well as what they list as favorite pastimes on their users' pages. Facebook is quietly working on something similar but has a ways to go.

MySpace already has begun inviting a few of its advertisers to target 10 groups of users, said Michael Barrett, chief revenue officer for Fox Interactive. In an internal test that tried to reach users interested in fashion, such targeting increased the response rate by 85%, Barrett said.

Targeting is crucial because although MySpace enjoys more pages viewed per month than any other site in the world, it hasn't been able to charge much for ads. Marketers are wary of landing next to a random 15-year-old's idea of gross humor.

As a result, MySpace collects less than half as much revenue per visitor as AOL or Yahoo, Sanford C. Bernstein analyst Michael Nathanson said.

MySpace prohibits users from sending commercial messages, advertising products and posting the address of outside websites. It bans "any commercial endeavors" not endorsed by the company. The trouble is, many MySpace users have figured out how to get around the rules, leaving the small staff too overwhelmed to enforce the restrictions with much rigor.

Instead of listing the Web address of her nudie site on her MySpace profile page, for instance, Billard urges her visitors to look it up by adding "a .com to the end of my name. Hint hint!"

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