MySpace Math Does Not Compute

The New York Times ran a piece on MySpace generating $200M revenues this year (an estimate from an outside analyst) with 1B page views a day at a "slightly over" 10c CPM.  Now, 10c CPM * 1B page views * 365 days = $36.5M, not $200M.  So a better current estimate of MySpace revenues is $40M annualized, based on 'slightly over' 10c CPM.   Ross Levinsohn thinks he may be able to double the CPM, and MySpace looks to double over the year in members, and page views may grow faster than members, so perhaps at year-end they could be at a $200M run rate.  No way would their year be $200M.  And even the $200M run rate seems a stretch.  The 10c CPM is a lot lower than even the normal remnant ad rates of 50c on the web, and as members increase there may be more a regression to the mean (fewer page views per member) than the other way around.  A phenomenal success, certainly, but not yet the money engine of Google. 

Comments

[Rich Melmon]

Why is the CPM so low? Probably because perceived value of its delivered impressions is very low. Not a good prognosis. MySpace may be at its Prechter Peak. Traffic is not everything.

[Someone]

In the words of the great Yogi Berra, "Nobody goes there anymore, it is too crowded". 18 months from now Myspace will be yet another ghost town social networking site in the tradition of friendster, orkut and all the others that I have forgotten.

As all social networks, it was built on being the in-site, it will die because everyone and their mother has an account now. I mean, seriously, how cool is it to have an account on myspace these days? The successors are successfully attracting the trendsetters, maybe the next big thing will be a site where their parents cannot get an account...

And 18 months from now, all the analysts will comment about how being acquired by the big bad corporation destroyed myspace.

[EN]

Hi Yelnick:

I realize that this blog is about myspace.com but I would like to know if you have any thoughts on the future of wireless internet. My internet connection is vitually my second brain and I see more and more people completly connected as they travel throughout cities.

I am sometimes traveling and need a wireless connection in major cities. One must either purchase a wireless data plan from a cellular company at a high price for very little data (250MB per month) or find a wi-fi hotspot.

Question: How long do you speculate it will be before all major North American cities are fully wi-fi powered such that there is no need to use cellular signals?

Your view on the futures of wireless internet is very much appreciated.

Thanks.

[yelnick]

En, good question. I have done several start-ups, including Covad, which took on the incumbent phone companies. My last one was SkyPilot, which makes municipal mesh gear that is being used by MetroFi to provide free citywide WiFi. The rollout of city wifi is proceeding apace, but any such rollout will be slow. Give it 3 years until it is noticable in most cities. By then cellular data will have increased to next-generation speeds, and the cost for a flat rate plan should be $15-25 range per month. Also Sprint will just be starting a WiMAX rollout. Competition works! Only when there are at least three options (DSL, Cable modem and muni WiFi, or cellular data, WiMAX and muni WiFi) will prices drop and service improve.

[Jamie Davidson]

The math might be slightly better if you believe:
http://www.mikeindustries.com/blog/archive/2006/04/myspace-click-factory
Using 30B page views per month (the same 1B per day) and the same $.10 CPM per ad but approx 2 ads per page (assuming they are nearly fully sold no small assumption) MySpace doubles their revenues. This is still no where near the $200M figure but a slightly more healthy $60-70M. Again, if Mike is to be believed the reason for the low CPM is because of the poor quality of all of those billions of page views. Inefficient webdesign allows them to inflate their figures. A page view here does not mean a new set of eyeballs on an ad but rather users becoming increasing frustrated due to poor design. The advertisers here see the value of a given page view for what it is. They can track acquisition rates, isolate their ROI and determine what MySpace is truly worth over time. Sounds a lot like the free market of advertisements Google CEO Eric Schmidt explained would inherently price in ad spam earlier this month.