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Economics of MySpace

Let's just talk about "is" for a moment. We will get to "can" and "should" later.

Teenagers are tremendously motivated by anything that might make them more interesting to the opposite sex. It's pretty simple really. Nature has turned on (big time!) their sex drive - the need to find a mate and reproduce. This in a society where having children while in your teens is greatly frowned upon. Restriction placed on a powerful urge creates an enormous tension. Dealing with this tension can prove quite difficult for teenagers and their parents.

Teenagers tend to think they are indestructable. Again, this seems to be something in-built by Nature. Behaviors that adults generally would refrain from, regularly kill teenagers. Naturally this is another source of tension between teenagers and their parents (as parents do not want to see their kids dead). To a teenager, if something bad has not happened to him or his friends, then the possibility seems simply too remote to think about.

Do parents sometimes over-react to risks to their children? Of course they do! Parents are generally fond of their children, and are going to be very uncomfortable with any significant risk. No parent wants to end up with a dead child. Pretty much every parent knows of another parent with a dead child, so it does not take much imagination on the parent's part to see the same thing happening to them.

This leads us to MySpace. Back in July, News Corp bought MySpace for $580 million. No doubt they expect the then 16 million monthly users to grow (roughly 22 million more recently). Rupert Murdoch (the owner of News Corp) will make back his money by selling advertising (MySpace hosts 12 percent of all ads on the Web, more than any other site), so popularity of the site is the most important consideration.

Ignoring popularity for the moment, the MySpace site is nothing special. If MySpace were a car, it would be a Yugo. The features offered by the site are nothing special. The reliability and performance offered the site is relatively lousy. The underlying implementation - PHP on IIS using MS SQL - is pretty naive. Popularity - not technology or implementation - is the only thing special about the MySpace website.

So what News Corp bought was popularity - so let's talk about why MySpace is popular.

MySpace does not really restrict kids from using the service by age, or make more than a token attempt to control what kids say. Make no mistake, the popularity of MySpace began with and continues to be driven by kids using the service. Because of the lack of restrictions, MySpace became "cool" and popular with kids.

Teenagers by nature are unmindful of risk. On MySpace users can expose themselves (in both a figurative and literal sense) far more than other "social networking" sites. Talk to a teenager and they somehow expect that what they post will only be viewed by their peers.

This naturally is a perfect setup for any sort of predator. You would expect an uptick in crimes against minors. On the other hand, MySpace is new enough that it will be quite a while before there are any sort of specific statistics. Lacking specific numbers, let's put together an estimate.

From documents published on the CyberTipline website we can get a variety of statistics, including - of a nationally representative sample of 1,501 youth ages 10 to 17 who use the Internet regularly ... one in seventeen was threatened or harassed. Lets assume that only a fraction of those incidents might rise to the level of a crime, enabled by the previously unattainable information made available on MySpace. One in 200 is less than a tenth the most aggressive reported incidents. Let's use one in 200 as an upper bound, and one in 2000 as a lower bound.

Out of the 22 million recent number of MySpace users, some are not children, so rounding down we can very roughly estimate the incidents that might rise to the level of a crime at about 10,000 to 100,000 per year.

Want MySpace (and the inevitable imitators) to clean up their act? Pass a cost back for each crime in terms of liability. Right now crimes against minors cost MySpace nothing. Businesses respond to costs and profits. If the incidents between a predator and a child cost MySpace an average of $6,000 to $60,000, the entire net worth of MySpace would be wiped out in a single year. You can bet that MySpace would care a lot more about the safety of their users, if there was a cost attached.

In fact the origins of MySpace are less than innocent. In the beginning, while building up popularity, MySpace did not run ads. The hosting bills for the site must have been considerable, certainly beyond what could be supported by the nominal individual creator of MySpace. Someone supplied a lot of money to get the site going - someone whose motivations were likely less than innocent. Did the original backers of MySpace choose to ignore risks to children on the way to making a profit?