Question 1: Was it reasonable for Facebook to initially ignore a segment of its market when MySpace was so big and Facebook so small?
Yes, Facebook was justif ied in concentra ting on a small section of its market and ignor ing a segment of its potential market despite the fact that MySpace was so big and already established in the industry. This is because a ccording to DePamphilis (20 09 ), market entry and penetration is aimed at targeting a particular section of the market before the broader strategy is rolled out to incorporate the entire industry. For instance, given the status and market segment of MySpace when Facebook was being launched , it would have been expensive for Facebook to take MySpace head on and compete for the same clients. MySpace possess ed not only an advantage of being an established brand in the market but also had immense re sources at its disposal.
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Facebook ’s strategy to restrict its primary market to college and ivy league university students only was thus the most effective and systematic approach to introduc ing the brand into the existing market. By concentrating on a small segment of the larger market, Facebook had enough time to test various market entry strategies before expanding its target market. In this case , Facebook’s successful entry into the social media market can be attributed to the stepwise approach in which the company increasingly expanded its target market with time . This was as opposed to targeting the entire industry at once (DePamphilis , 2009 ). Hence, it was reasonable for Facebook to initially ignore a segment of its market when MySpace was so big and Facebook so small .
Question 2: Friendster turned down a $30 million acquisition offer, and MySpace accepted one for $580 million. Both decisions are considered to have hampered their ability to compete with Facebook. Why?
Friendster’s rejection of a $30 million acquisition offer from Google in 2003 weakened its competitive advantage against Facebook . On the other hand, M ySpace ’s acceptance of the $580 acquisition offer from News Corporation significantly weakened its power to compete against Facebook. Unlike MySpace which allowed for global membership, Friendster had restricted its operation s to Asia where it enjoyed the backing of leading global c apital venture firms (Seki & Nakamura, 2016) . At the time of the offer of acquisition, Friendster had full control of the Asian s ocial media market and almost enjoyed monopoly except for MySpace which was picking up. Cohan (2017) argues that dislodging Friendster from the Asian social media market by any company would, therefore, be an uphill task that would require numerous resources.
Just like Facebook, Friendster had identified a section within the broad market segment and concentrated on a smaller manageable portion. Furthermore, the prospects for future growth and expansion were still viable with Friendster . The firm rejected the offer when it needed to expand, and Google could have facilitated this growth, subsequently enhancing its ability to compete with Facebook (Seki & Nakamura, 2016) . On the other hand, News Corporation presented the acquisition to MySpace when the latter had almost exploited the available market and as a result expected very minimal future growth and expansion (Cohan , 2017). Following the acquisition, there were no new market opportunities for MySpace to tap into and as a result, its competitive edge against Facebook significantly drop ped. Ultimately, Facebook overtook MySpace to become the leading social media site.
Question 3: Should they have taken the money? When and how do you know it's time to sell?
Friendster should have taken the $30 million offer from Goodge and sold off the firm. Several signs make it inevitable to accept offers for acquisition in the industry. However, two major signs are often considered the prime indicators. First, an a cquisition should be considered when a firm realizes that it cannot m atch the competitive ability of not only existing players in the industry but even new entrants ( Abrams, 2012 ). This often occurs when different competitors realize a significant increase in the market segment through use of almost similar or related marketing strategies as the one employed by the company in consideration. For instance, the fact that Facebook was experiencing tremendous growth by concentrating on a smaller market segment meant that it had successfully mastered the strategy used by Friendster and was poised to overtake the latter. Hence, Friendster would have been wise to accept the acquisition proposal.
Secondly, Abrams (2012 ) argues that a company ought to allow for acquisition when new entrants experience rapid growth at the expense of the incumbents. In this case, the fact that MySpace had rapidly grown to dislodge Friendster as the leading social media player was an indicator that Friendster had lost its competitive edge on the market , and therefore it would have been wise for the company to consider selling off its market segment to a potential buyer.
Question 4: MySpace later became known as the social networking site for music and entertainment connections. Do you think it can build a highly profitable business around this niche still with the advent of Facebook and other entrants into the marketplace? Explain in detail and support your answers using sources of researc h ? Use credible sources to support and explain .
Despite the change in business idea and hence industry, MySpace is bound to realize minimal success even in the music and entertainment sector. The first reason for minimal success is that the music industry is already saturated with established brand s such as YouTube, Tubidy, Facebook and other smaller but similar service providers (Cohan, 2017 ; Mjos, 2013 ). T he competition in th e industry is evidently high (Mjos, 2013 ). Subsequently , penetrating the existing market and establishing a significant market share to guarantee profits might be unrealistic for MySpace. In reality , the company might be forced to spen d more than what it could have spent had it remained in the social media industry.
Similarly , what was required of MySpace was a change in marketing strategy and not business diversification. For instance, on attai ning recognition in the social media industry , the company ought to have change d its marketing approach fr om a penetrative one to a sustenance one . T herefore , the company failed not because it could n’t compete successfully but because the management failed to switch its marketing strateg y to one that would favor its current status . Thus, t he firm continued to operat e on old marketing policies ( Abrams, 2012 ). Overall , it might be impractical for MySpace to rise again to reach its earlier status despite the change in its line of business .
References
Abrams, R. M. (2012). En-tre -pre- neur -ship: A Real-world Approach: Hands-on Guide for Today's Entrepreneur . Planning Shop.
Cohan, P. S. (2017). Disciplined Growth Strategies: Insights from the Growth Trajectories of Successful and Unsuccessful Companies . Marlborough, MA: Apress.
DePamphilis, D. (2009). Mergers, acquisitions, and other restructuring activities: An integrated approach to process, tools, cases, and solutions . Academic Press.
Mjos, O. J. (2013). Music, social media, and global mobility: MySpace, Facebook, YouTube . Routledge.
Seki, K., & Nakamura, M. (2016, August). The collapse of the Friendster network started from the center of the core. In Advances in Social Networks Analysis and Mining (ASONAM), 2016 IEEE/ACM International Conference on (pp. 477-484). IEEE.
