[iDC] Work force, cost of operation, profits [was: MySpace staff cuts]

[Trebor Scholz]

Hi Sean, Jean,

What interests me about the small number of employees is that in the past,
when "new media" and their associated industries lost their centrality, the
laid off workers were often able to move into other (emerging) sectors of
the economy. 

Today, that is not the case. In recent years, new social media have
diminished the demand for professional editors, journalists, and
photographers. High traffic blogs and photo-sharing sites have put up tough
competition for people in such professions. In the United States, many
newspapers are closing down or seek alternatives to print in order to stay
in business. Some volunteers perform work that was previously executed by
by trained and paid professionals. Most editors who lost their position at a
local newspaper will not find a job at Yahoo, YouTube, or MySpace because
these companies can operate with a small workforce. Craigslist, one of the
largest providers of free classified ads, has no more than twenty-five staff
members. CBS has a total of 32,160 employees (2006) while MySpace, as you
point out, only employs 1400 people in the United States.

==

Jean, you claim that there is a "profound inability of most of these
platform providers to make any real money out of that activity - once you
factor in bandwidth costs, at least thus far." http://is.gd/1c5Mu

Intermediaries and marketers, I agree, are still by all means ³inefficient.²
They are not very good at using the data that they have at their avail (much
gets thrown away, for example).

However, it's a myth that online intermediaries currently don't make "real
money." Like a mantra, consultants repeat that it is quite possible that
social networking, just like e-mail in the past, will never turn significant
profits. For me, the perception that no "real money" is made has more to do
with speculative behavior ($1.6 billion for YouTube?) and the insatiable
greed of operators than with the financial data on the ground.

In 2006, MySpace's annual operating budget was $40 million. It is, of
course, costly to run thousands of servers and the needed bandwidth to
sustain the networked public life of millions is expensive. You are right--
even content, submitted by users, comes at a price. Some companies have to
pay employees to filter out inappropriate material, developers have to build
robust software, and system administrators have to keep it all going.

In 2005, NewsCorp bought MySpace for about $650 million and in 2009 its
estimated value is $15 billion. (Yes, of course, the latter value is
speculative.) 

However, in 2008 alone MySpace made more than $700 million from advertising.
I'd call that real money but surely Rupert Murdoch would not agree.
Nevertheless, these numbers do suggest that in the case of MySpace the
profits made off the interaction labor of users are substantial and that is
without me even mentioning its $900 million deal with Google.
(Facebook hopes to double its revenue to $300 million in 2009, its fourth of
existence.) 

The operating costs of online intermediaries are considerable and while the
profits may not be as astronomical as analysts in Silicon Valley may have
hoped, the corporate gains from the commoditization of networked publics are
not a product of the imagination.

Trebor