MySpace, one of the first large-scale popular social networks, just sold to new owners for a little over 5% of what it sold for 6 years ago. This incredible drop reflects not only the ailing fortunes of the company, but a wider shift in internet use patterns that may become part of a new internet business model.
Many inside the company blame Facebook for the decline in ad revenue, which surpassed MySpace in popularity in terms of total monthly visitors over 2 years ago. However, MySpace is hardly the first casualty of the ephemeral internet business model. Many internet based companies that were hot only a few years ago have discovered that their relevance and corresponding value drop just as fast as they initially climbed (remember Friendster, Pets.com, or Pandora?). Is this rapid climb/fall scenario setting a new trend for 21st century business?
Of all the internet based start-ups to come out of the rich innovative period from 1990 to 2008, only a select few have managed to hang on to their highly touted potential value, such as Google and LinkedIn. The vast majority of these companies showed promise but then fell onto their faces once they entered the public sphere. Of course, Google is facing problems of its own with an FTC probe for anti-trust violations. Essentially, Google has unfairly sustained its popularity because it kept anyone else from competing with it.
Of course, despite what people want to believe, there is no such thing as stability. Pre-internet, it was rare for any business to last for decades, let alone centuries. Only banks, breweries, and universities seem to survive for hundreds of years relatively unchanged. What seems to be different now is how rapidly businesses come and go. Can any internet start-up last for at least one human generation and give rise to the false belief that there is in fact such a thing as “stability in the marketplace”?
If Google is still around in another fifteen years, there may be a more relaxed attitude towards the sustainability of internet businesses. As of now, it is simply too early to determine if and how start-ups will transition into steady-earners.
Article first published as The Transition from Start-Up to Steady-Earner on Technorati.