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The MySpace economy

By Rachel Rosmarin, Forbes
April 13, 2006 11:07 IST
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Tens of millions of people show up regularly at MySpace, News Corp.'s suddenly popular virtual hangout. That's good news for News Corp. boss Rupert Murdoch, who raised eyebrows by shelling out $580 million for the Web site last summer.

But it's also an opportunity for ambitious entrepreneurs who have figured out how to make money by catering to the site's hordes of visitors.

Like mega-sites eBay and Google before it, MySpace is creating its own economic ecosystem, populated by small businesses that do everything from helping users decorate their profiles to creating tools that let advertisers target MySpace users.

It's unlikely, though, that the MySpace spinoffs approach a fraction of the revenue News Corp. is generating from the site itself. Even though some mainstream advertisers have expressed reservations about participating in MySpace's wild, just-about-anything-goes atmosphere, plenty are willing to get in front of the site's users, who have made it the second-most trafficked site on the Internet, according to ComScore Networks. Analyst Richard Greenfield of Pali Research estimates that News Corp. sells $13 million in ad revenue each month.

Meanwhile, Louis Ramos, a freshman at Southern Illinois University, says he has made more than $200,000 since last June by running and, two Web sites that offer MySpace users free tools to upgrade and spruce up their profiles with colors and images. MySpace doesn't build many customization options into users' profiles.

Ramos, who makes money by hosting ads from Google's AdSense and ValueClick's FastClick networks, says he's received six-figure offers from Internet companies interested in buying his sites.

"Hundreds of people are doing this," he says. Other programmers offer to overhaul MySpace profiles for a fee, charging several hundred dollars for the service.

Another subset of sites has cashed in on MySpace's popularity by creating and selling software designed to automate tasks within the network, such as inviting and confirming friends, posting messages and sending bulletins.

Some versions of this software allow MySpace users with thousands of friends-such as companies that have created profiles-to contact groups of friends by age, ZIP code and other demographic information. Without the tools, users would need to complete transactions one click at a time, but the software effectively allows them to conduct a highly targeted direct-mail campaign.

Programmer Justin Lavoie, whose Silent Productions firm sells bundles of software like "Friend Request Broadcast" and "Comment Broadcast," says he has more than 4,000 customers. Lavoie sells the packages, which start at $50, through affiliates, which take a cut of each sale.

Lavoie says he and some of his affiliates have received cease and desist letters from MySpace commanding them to stop selling the software; he also says some of his competitors have received similar warnings. MySpace officials declined to comment on Lavoie's business or any other MySpace spinoffs.

"MySpace doesn't want any marketing on its site other than what they are getting paid for in the form of banners and other ads," says Brandon Hoffman, director of Internet marketing at Kea Advertising, an agency in Valley Cottage, N.Y.

Hoffman uses Lavoie's software in the MySpace accounts he created for several of his clients, primarily car dealerships. "The beauty of it is that it is 100% permission-based," he says. "The dealerships' friends can cancel at any time, so it isn't like we're spamming them."

Entrepreneurs say some of the most successful MySpace spinoff businesses are now being auctioned for thousands of dollars. "People make a ton of money" selling the sites, says Michael Melen, who operates several MySpace-related services. Melen's offerings include, which shares ad revenues with MySpace users who put banner ads in their profiles, and, which allows users to surf the site anonymously.

But some MySpace businesses don't require any particular technical skill or Web savvy, just a sense of what the teens and twenty-somethings who flock to the site are interested in. Like poking fun at the fact that MySpace users' profiles come preconfigured with co-founder Tom Anderson listed as a "friend."

Josh Abramson, co-founder of Connected Ventures, has sold more than 610 $18 shirts in six weeks that take advantage of what is becoming quite a public in-joke. The shirts read, "Tom is NOT my friend."

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Rachel Rosmarin, Forbes

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