Friendster Predecessor of Myspace
Friendster is a popular social networking service website at the beginning of the twenty-first century. Friendster grew aggressively just after its launch in 2002 but their popularity did not last long. Friendster was at a difficult time when other competitor comes up with more attractive sites. They were struggling to sustain their business but unfortunately, they failed to maintain it. In 2009 Friendster was acquired by MOL Global and discontinued user social network accounts. Some researchers have observed how could the predecessor of Social Networking Sites failed and been discontinued in less than a decade. This report sets up to analyze several factors which make Friendster could not survive in the market focusing on the customer side, the company’s capabilities, potential competitors, and company climate.
Friendster is one of the popular social networking service website which helps people connects with others across the world. Friendster can be considered as the pioneer in this technology industry before the other social sites, like MySpace, Facebook, or Orkut comes up.
Through the Friendster site, users can communicate with their friends, share content like photos or videos, and leave a comment through their profile. This website was also used for online gaming, online dating, and even finding out about new shows from our favorite bands. Friendster’s idea itself comes up while Jonathan Abrams, the founder, argues about the online and offline problems of social life. In offline social life, people certainly have a limited circle of social communication, only with school mate or colleagues. On the other hand, the online social life would enlarge that possibility and meet more new people. Abrams wanted to find a way for people to meet new friends on the internet and expand personal networks in a safe way. After that, he had the prototype, and Friendster was launched in 2002 by Peter Chin, Jonathan Abrams, and David Lee. At that time, the idea of social networking was groundbreaking.
Friendster grew aggressively just after its launch. Venture Beat stats, by June 2008, Friendster reached 37.1 million monthly active users. Out of these numbers, the majority of Friendster users were from Asia. The number of Asian users reached 33 million monthly active users. For these achievements, referring to a report published by Techcrunch, Friendster obtained funding up to $50 million from several venture capital. Moreover, Google wanted to buy it for 30 million dollars in 2003 but Friendster rejected Google’s offer.
The Friendster’s popularity did not last long, they had to deal with a lot of new competitors. In August 2003, MySpace came up with their value proposition to grow their business by making users to invite their family, friends, and others. Not only just that, but Google also launched Orkut in January 2004, after they failed to attempt the Friendster acquisition. In 2004, after the fast rise of Facebook, Friendster slowly lost their potential users starting with the United States than Europe.
Friendster’s popularity dropped as well as the presence of Facebook, making users switch to that social network. Seeing this as performance degression, the body of Friendster company was changed immediately, where Jonathan Abrams was released from the position of CEO and occupied the role of chairman. One day, Abrams had an opportunity to meet Zuckerberg in 2004. Friendster was eager to buy Facebook that day but Abrams refused to offer the right acquisition. Six years later, Facebook and Friendster were involved in the acquisition agreement again. But this time, Facebook wants to buy a full portfolio of Friendster related to social networking patents worth USD$40 million.
On December 9th, 2009, the social network was acquired by MOL Global, Asia’s largest internet company based in Malaysia. In the latest news, Friendster was rebranding their platform as a gaming site and discontinued user social network accounts. But as of June 2018 was taken down, as it states: ‘Friendster is Taking A Break’.
The fall of Friendster had been represented as a technology management failure. Indeed Mikolaj Jan Piskorski, an assistant professor at Harvard Business School, uses Friendster as a case study on how not to manage a technology company (Rivlin, 2006). In that case, the writer wants to make a report analysis for why Friendster failed to maintain their company, thus we can learn from their mistakes and avoid being part of the business failure.
2. PROBLEM AND ANALYSIS
2.1 Defining the Problem
To define the business problem, we can use the SCQ Framework. This framework helps us to systematically understand the existing state and notice the gap between the current state and the desired state by defining the current situation, complication, and key question.
a. Situation: Friendster was founded in 2002 and became the first popular social site which attains over 3 million members within the first few months.
b. Complication: In early 2008, Friendster went through a deterioration of users’ amount along with the rise of their main competitor, Facebook. According to Alexa, the site fell from a peak 40 ranking to 800 in November 2010. Many users fell into Facebook or MySpace because they are more attractive.
c. Key Question :
- Why was Friendster fail in sustaining active users not as well as their competitors?
- What contributed to the downfall of Friendster’s user number?
2.2 Analyzing the Problem
To get answers for those questions, we can analyze the problem by using 4C Framework. This framework form the basis to methodically evaluate a firm’s current internally and externally position in the marketplace. By using this framework, we can understand the customer side, company’s capabilities, potential competitors, and climate (environment).
a. Failed to build customer segmentation
Customer segmentation is the practice to divide potential customers in a given market into smaller groups. For large companies, this implementation is highly valuable by reason of every customer has a different orientation to use products or services. If they have a specific target of customers, they undertake marketing efforts with ease. This practice also gives the company brand equity and gives perception about whose regularly use their products. When we came to Myspace, what we think is about music. Myspace organized users around favorite bands, as their core business. Later on, Cyworld, a South Korean social network service who focused on Korean pop culture. Through this site, fans could find new updates about their favorite K-Pop Idol. Afterward, Facebook, as Friendster’s major rival, they focused on social activities. Facebook has served variety of features to connect with people around the world. They even launched chat feature which has never been adapted before by other social sites. Accordingly, Facebook is more preferable for sociable teenagers. Then, what about Friendster? Everyone was confused about what is Friendster targeting about. Customer segmentation is a key part of targeted marketing strategy. And Friendster failed to build it.
a. Powerless CEO role and poor management
Abrams, as the highest authority in Friendster company, frequently took mistaken decisions which makes Friendster even worse. One, in particular, was when a fast-growing Silicon Valley start-up, Google, had the intention to buy Friendster for USD$30 million in 2003. Abrams thought his company would be worth much more in a short time and he said no to Google. Three years later, Abrams probably regrets his decision because according to Hill, if he accepts Google’s offer, he may get a profit up to 1.5 billion dollars nowadays. Factoid: This is considered probably one of the biggest faults in startup history. After this embarrassing incident, Friendster lost their heyday and was taken over by MySpace, Facebook, and Flickr. The other critical problem from this company was its management. There was a continuously revolving for the CEO role. The board has demoted Abrams as CEO in March 2004 and replaced him with Tim Koogle, the former CEO of Yahoo. No more than 3 months, Koogle has been replaced by Scott Sassa, a former TV Executive, who only lasts for a year. Until 2006, Friendster was occupied by their fifth CEOs, that is Ken Lindstrom. This endless-revolving cause Friendster’s management was unstable.
b. Inferior Technology
One of Friendster’s problems was the infrastructure cannot handle the massive influx of users, causing too-slow page loads. It may take as long as 40 seconds for pages to download1. By late 2003, users were complaining that pages were often incomplete as well too. There were several reason why this phenomenon occurred. First, the site was experiencing seldom-witnessed exponential growth (Fisher, 2014). In a few weeks, Friendster users were growing fast reaching 3 million active users. The other reason why loading pages in Friendster was way to slow is they adopted close system. Friendster users can only see other profiles on relatively short relation. On the other hand, MySpace decided to innovate by applying open system to easier users view other people’s profiles.
c. Lack of Innovation
Many people do love Friendster because of their flagship feature, “Testimonials”. With this feature, Friendster let users write their impressions or opinions to their friends, which will then be displayed on the friend’s homepage. Aside from sharing testimonials, Friendster is also known with their “Customize Page” feature where users may personalize their own profile page as much as they want. But unfortunately, they kept showing users the same thing every single day. If they remain to bring no other innovation, the site became too boring and users simply lost interest in Friendster. Even in categorizing photos, Friendster chose to display it on one large plain page, which makes Friendster pages not attractive at all. Moreover, the user also experienced problems in finding their friends if they did not know the detailed information needed, specifically the full name and personal e-mail of the user. This is what makes Friendster users move to their main competitor, Facebook because they were more able to handle these problems.
a. Mushrooming of Social Networking Sites
Friendster was the first social network site but the idea of Friendster itself was easy to copy. Starting from many competitors that duplicate the concept of this social site. In 2006, SNSs were mushrooming. While Facebook focuses on ‘Facebook College’ they had the added benefit and gaining quick momentum among college students. LinkedIn, which was discovered in the same year as Friendster, has gone through a period of ups and downs and is assigned to enter the business-oriented field, mainly used for professional networks. This strategy went well until 2008 when the economy was unstable and job opportunities were scarce.
a. High Spread of the Internet and Technological Advances
Since 2003, internet services was spreading fast more. It became more potential for Friendster users to come online every day. Hardware and software also developing at unstoppable pace. Computer machines work faster and more easily accessed with a low price range. Accessing the internet is so easy. Although this development has become a benefit for Friendster in increasing number of online users every day, this was also a threat when competitors could adopt technology at a much faster pace.
Many people over the past decade have observed about the causes of the downfall of Friendster. The best possible reason can be traced back in early stage when Friendster failed to overcome their technical issues and listen to users needs who wants to share and connect in different ways. They obviously failed to understand where the success factor was coming from and what factors helps them achieve the golden ages. We can learn from Friendster company that customer, management, innovation, and technology are very important to keep sustaining business in the market. That is why this report help us to understand the problem and not experienced the same mistakes again.
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