It's been a tough day for MySpace as the company fired nearly 30 percent of its workforce. When it's tough to tell whether the blood on the floors from the axing is flowing as fast as the printer ink as those who remain prepare resumes, the atmosphere is serious. However, what MySpace faces now is something to which both Twitter and Facebook should pay close attention. The world can seem fine when you're on top, but when your business is driven by fad and fashion, up and down can switch in the blink of an eye.
There's a lot of euphemism being shoveled out the door at News Corp's struggling online business at the moment:
Owen Van Natta, CEO of the News Corp.-owned social site, said in a release: "Simply put, our staffing levels were bloated and hindered our ability to be an efficient and nimble team-oriented company. I understand that these changes are painful for many. They are also necessary for the long-term health and culture of MySpace. Our intent is to return to an environment of innovation that is centered on our user and our product."Or more simply put, they don't know what hit them. Bloated? Why so much staff in the first place? (Silicon Alley Insider has some terrific graphs showing the drop in visits per user and time per visit and an apt comparison between My Space's 120 million unique visitors and staff of 1,000 and Hi5's staff of 60 to 60 million uniques.) An environment of innovation? What real innovation has been going on?
Here's the problem: MySpace and News Corp took themselves too seriously. Although admittedly difficult to run an online service with this much traffic, the site isn't rocket science and it's not high innovation. MySpace has been a fad. Don't' get me wrong, I'm not saying that fads are bad, or that they aren't real businesses. Some fads have turned into long-term propositions. What was Coca Cola in the beginning if not a fad? But for any staying power, a company must quickly get serious and start planning beyond the personal sensibilities of those who run it. A company based on a fad has to figure out how to grow up and not linger in adolescence.
Being able to cut a full third of your staff because it represents "bloat" is evidence that those running things were not acting as mature adults. No sober businessperson keeps that many extra people on the payroll. A company built on riding the wave of popularity cannot assume that it will be there forever. (I can remember my teenage daughter saying a few years ago that MySpace was "over" for her crowd.)
And this isn't just about MySpace. I've been reading criticisms of Twitter from some long-time online experts and also talking to some developers of Twitter add-ons, and that company is also showing signs of being a classic corporate Peter Pan, not wanting to grow up. What business can exist without knowing how it could make money? I respect that people like Bijan Sabet of Spark Capital have invested and are sure that the company's plans will become clearer within the next 18 months. Presumably the people inside have some sense of where they're going. (My colleague David Weir at BNET Media thinks there are still some potential opportunities to build a business model.)
Let's get some perspective. Some companies take a long time to start making money. It took FedEx five or six years to become profitable. And how long was Amazon running on red ink before finally coming around? But there's a big difference. Both of those companies started with a business plan and a model of how they could eventually work their way into profitability. Twitter seems to be more stumbling around, trying to find something that would work.
The problem goes deeper when you look at how the service is interacting with people who should be important to it. For example, a few weeks ago I heard about Twitoria, a site that helps you prune through your followers on Twitter, but every time I tried it, the service was down. I emailed and received the following answer:
Twitoria has been having issues lately due to recent changes in Twitter's API. Sometimes it works, while sometimes it doesn't. We're working on a fix.What software or online service company can afford to have an API that sometimes works and sometimes doesn't? As I checked into this more, I found an increasing number of developers facing the same problem -- developers who were creating the very ecosystem that has helped Twitter become popular.
"That just happened [to us] two days ago," says Mark Smillie, president, Monarch Convergence Group, which runs LocalMo.com. I was looking at my site and it was getting an error. I checked a couple of other sites that were basically Twitter apps. It was either busy or there was something going on with the API. I think they're experiencing serious growth pains. But that's good."
Maybe. Growth pains help if a company quickly improves, digesting the expansion. But it's not clear that Twitter is accomplishing that. A number of developers I contacted were afraid to criticize Twitter, worried that the company would retaliate. One that wasn't shy was Jesse Stay, CEO of SocialToo.com.
"It's been happening for over a year plus now, so it's nothing new," Stay says. "They've been working on this and improved on a few things, but as they continue to grow faster and faster, they're constantly playing catch up." They're growing too fast to keep pace with the business. Management doesn't adequately communicate, with developers often learning of critical changes too late to plan a response. Stay is already starting to lose faith and looking at other potential platforms, including FriendFeed. It's not the sort of news a platform provider should want to hear. (I had tried emailing Twitter earlier to schedule an interview but didn't hear back.)
Lack of communication speaks to disorganization. A more serious issue is perceived favoritism. Featured apps on Twitter are "picked by employees," says Stay, which sets up an atmosphere of preferential treatment. "Facebook has been guilty of it as well. It's not fair to developers that have good apps that the public like but that aren't the favorites of your people. In the end, they run the company and they can do what they want. That's the risk you take as a developer."
That charge of preferential treatment has also been raised by such people as Dave Winer and Robert Scoble. You might say that it was sour grapes at being tech honchos who weren't included, except that Twitter co-founder Biz Stone's makes it sound that it's essentially an exercise of whim. Some others are less generous in their descriptions of the process. Even if critics have got it wrong, Twitter has created the impression.
A growing company can't afford to antagonize users or developers that support it. Yet that's what it seems "Twitter Pan" is doing. Not knowing how to make money, hanging out with the "cool" kids -- this isn't adult business. It's riding a fad.
Facebook isn't much better off. It may have pushed MySpace off the popularity throne, but it is making its own mistakes, like offering the new vanity URLs to journalists covering Facebook before members of the public got theirs. (Ironically, this scheme broke down and left the journalists waiting longer than everyone else. And then, I hear from my daughter that people she knows are getting fed up with Facebook. Sometimes it pays to listen to people -- while you still can.
Image via Flickr user , CC 2.0.