MySpace aims for trickier markets

When MySpace.com invaded parts of Western Europe last year, it launched customized versions of its site that looked very similar to the original American one. The result: It caught up with and in many cases surpassed local competitors. Now MySpace is embarking on a tougher assignment – moving into countries where Internet conditions require a much more individualized approach.

Having already built local versions for 22 countries and territories outside the U.S., the News Corp.-owned Internet giant starting this month and into next year has plans to launch custom sites in India, Russia, Poland, South Korea and Turkey, according to Travis Katz, managing director of international for MySpace. In each of these countries, Web cultures vary dramatically from that in the U.S. and much of Europe.

In some countries, such as India and parts of Latin America, average Internet speeds are comparatively very slow. So MySpace is developing a less-sophisticated version that probably won’t automatically stream video and music while users are surfing the site, although users could launch such features manually.

At the other end of the spectrum, South Korea boasts average Internet speeds many times faster than the U.S. and a much savvier Web culture. Blogging being hugely popular, MySpace is recasting its South Korean version as more of a blogging service, with new tools that make it easier for users to publish and promote their blogs through their profiles.

In other countries, such as Turkey, social networking is a less-familiar concept, requiring MySpace to design on-site tutorials that explain to users how to navigate the site, find profiles for music bands and search for friends. Language differences pose different problems elsewhere: MySpace is contemplating a move into Israel, but the predominant use of Hebrew there would require a site redesign for users who read right to left.

MySpace executives say launching in these countries won’t generate much revenue anytime soon. But establishing a presence in countries such as India and Russia is important for the day when Internet conditions improve. ”We are placing strategic bets,” says Mr. Katz. ”We are looking at places where there is not a ton of money to be made in the next five or 10 years, but we want to be well-positioned when things get there.”

MySpace parent News Corp. has agreed to buy Dow Jones & Co., publisher of The Wall Street Journal.

Expanding its global footprint is a top priority for MySpace, fighting intensifying competition from rivals such as Facebook Inc. While MySpace retains a big lead in the U.S., Facebook is growing quickly. And outside the U.S., Facebook has passed MySpace – drawing 55 million unique non-U.S. visitors in October to MySpace’s 45 million, according to comScore Inc.

While MySpace has a strong lead over Facebook in Europe, Facebook is the No. 1 social-networking site in a combined category for Africa and the Middle East, according to comScore. And Facebook is likely to become a bigger threat elsewhere: The company also has announced it is translating the site into new languages.

MySpace faces competition from other players elsewhere. In Latin America, where MySpace is a relatively small player, rivals such as Google Inc.’s social-networking site Orkut, and Fotolog and hi5 have loyal followings. Fotolog was recently acquired by French Internet company Hi-Media SA, which intends to market the site aggressively throughout Europe and Latin America. Russia-based Internet company SUP recently paid an undisclosed amount for U.S. blogging and social-networking service LiveJournal, which has nearly 14 million unique monthly visitors world-wide, according to comScore.

Richard Greenfield, an analyst with Pali Research, estimates MySpace’s non-U.S. revenue made up roughly 10 percent of the social network’s expected $800 million in annual sales. The company declined to comment on the amount but said it expects its non-U.S. revenue to more than triple this fiscal year over last year. But international growth is sure to get tougher as MySpace moves into new areas.

MySpace was one of the first U.S. social-networking sites to roll out local versions. Beginning in Europe last year, the company launched customized sites in the United Kingdom, France, Spain, Italy and Germany, since expanding to Austria, Sweden and Denmark, among others. In Europe, MySpace widened its lead over rivals like Bebo and hi5 by making connections among the local music, film and fashion markets. New launches featured high-profile concerts and partnerships with local radio and television shows. ”MySpace did it perfectly,” says Cyril Zimmermann, chief executive of Hi-Media, based in Paris.

MySpace has found the going a little tougher elsewhere. The company launched a Japanese site last year with Softbank Corp., a Japanese Internet and technology company, and it quickly made some adjustments. It learned that users were generally bashful about listing their interests, like a favorite band, in their profile, but they had no problem joining fan groups. So they raised the prominence of the groups section of the site. Nevertheless, in October, the local site still was only the 15th most popular social-networking site in the country, according to comScore, which includes some blogging sites in the category.

In China, a far trickier market, the company launched a site under a different corporate entity, licensing its technology and brand to a local Chinese company, MySpace.cn. The local site is relatively small compared with competitors, but it is growing, with 7.5 million unique monthly visitors in October, up from 4.1 million in September.

Mr. Katz of MySpace says learning from these latest markets will prepare the company for what it faces next. Among the new challenges will be new business models. Online advertising has translated well throughout most of Europe, as large brands like Adidas AG and Lacoste SA launch international campaigns. But advertising alone won’t support MySpace’s growth into India and Russia, where the online-advertising market is orders of magnitude smaller than in the U.S.

Overseas, competitors rely on alternative revenue streams like transactional fees from classifieds or charging for premium features. Mr. Katz says the company knows it has to be creative and will focus on other business models, such as deals with mobile carriers.

At the same time, MySpace is taking extra steps to get the public’s attention. In Mumbai, India, for instance, MySpace is sending employees to meet with Bollywood film-industry executives, hoping to lure stars to create profiles and share news and videos with fans.

Sergio Monsalve, a partner with Norwest Venture Partners, a Palo Alto, Calif.-based venture-capital fund, thinks that to be a truly global player, MySpace may have to acquire some local competitors, a strategy that has worked well for eBay Inc. and Google. ”MySpace appears to have a good lead,” he says. ”But it is the very early innings.”

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