Friendster - The Rise and Fall of the Online Social Network Pioneer

1 - The Dawn of the Online Social Network Revolution

The social networking site Friendster was a pioneer in the area of online social networking and revolutionized it. It was launched in late 2002 for the purpose of allowing people to connect on more of a friendly basis rather than a romantic one. Friendster was founded by Canadian programer Jonathan Abrams.

Even though there had been several others online social networking sites before (see Section 2 later in this blog), Friendster was the first one reaching over one million users and at its peak totaled more than 100 million users.

Illustration 1: Friendster login page in 2004 (Internet Archive, n.d.)

In 2003 Friendster declined Google’s 30-million dollar offer and instead took money from high-profile venture capitalists. In 2004 Jonathan Abrams (founder of Friendster) was removed as CEO and an interim CEO was appointed. Various senior management changes followed in short intervals (Rivlin 2006).

Soon after Abrams was removed Friendster started loosing users to first MySpace and then to Facebook. More and more users were attracted to the competitor's social networking sites.

Illustration 2: Search Traffic For Friendster (Chappell 2011)

In December 2009, Friendster was acquired by an Malaysian businessman (PR Newswire, 2009). From then on Friendster moved its focus to the markets  in Southeast Asia and the users numbers continued to tumble. In 2010 Facebook bought over all of Friendster's social network patents (Gannes, 2010).

Illustration 3: Top Regions For Friendster (Chappell 2011)

Presently, Friendster is a online gaming website based in Malaysia. A long distance away from the Online Social Network pioneer it used to be.

Illustration 4: Current Friendster website (www.friendster.com 2015)

How could the pioneer of Online Social Network fail and disappear in way less than a decade?
This blog sets out to analyze and answer this question. Let us start with a short and concise story of Online Social Network.

2 - A Short History of the Online Social Network

Illustrataion 5: History of Social Media (adapted from http://www.webanalyticsworld.net/wp-content/uploads/blogger/10-socialMediaTL_05.png)



The origins of social network can be traced all the way back to the Bulletin Board Services, AOL and CompuServe in the 70s, before the internet as we know it today was available to all. Around 1997, online social platforms were established based on the six degrees theory proposed by Kevin Bacon (cited in Anonymous, 2010). The theory states that "no person is separated by more than six degrees from another." (Anonymous, 2010).

In 2002 Friendster, LinkedIn and Myspace were launched one after another. They represented the blossom of social networking. Friendster, as in the words of its creator, was "a dating site that isn't really about dating"(Anonymous, 2010). Shortly after it was launched, three million users were attracted to the site.

After the fast rise however Friendster gradually lost its appeal starting with the U.S. first. Eventually, and little by little, both Myspace and Friendster were overtaken by Facebook. In 2010 Facebook announced that they had more than half a billion active users. Two years later in 2012 that number had double to 1 billion active users. End of last year Facebook was reaching 1.4 billion users dominating Online Social Networking (statista, n.d.).

3 - Archeological and Forensic Analysis of Friendster's Demise

Before answering the fundamental questions of why Friendster failed to maintain its lead and succumb to Facebook, we need to ask and get answers to more question such as the following:

• Why was Friendster able to attract some many users initially?
• Why did Friendster fail in keeping those users as well as attracting new ones?
• Why were MySpace first and later Facebook so successful in attracting and keeping Friendster users?
• What assumptions did the management make when they turned down the offer by Google?
• What contributed to the downfall of Friendster's user number in the U.S. market?

As all these events happened in the past and because Friendster as a social web site is dead we are going to perform a archeological and forensic analysis to get answers for these and other questions. Archeological because with the fast moving internet any remains of the Friendster's social networking web site can only be found in the Internet Archives. Forensic as the we also want to determine the factors that led to Friendster's demise.

The Onion's humorous take on "Internet Archeology" (Source: YouTube)

Investigative Tool

Helping us in this investigation we will be using the SWOT (Strengths, Weaknesses, Opportunities, Threats) strategic analysis model. Even though SWOT analysis has been questions for strategic analysis (Hill & Westbrook, 1997) for the Friendster case we are going to use the Customer-oriented SWOT Model by Pierce & Giles (1989) to help frame our analysis.

The Customer-oriented SWOT model is a matrix made up of external and internal analysis. The external part consists of Opportunities and Threats that exists in the environement and can not be influenced directly. The internal part consists of Strengths and Weaknesses that are recognized by customers directly or indirectly. By going though the analysis process internal Strengths are matched to external Opportunities (Matching Strategy). Strengths with no immediate Opportunities are of little value while highly ranked Opportunities for which there are no internal Strengths are food for fought. Converting Weaknesses into Strengths and Threats into Opportunities are called the Conversion Strategies. In some cases this conversion may be relatively straightforward in others cases a conversion may not be possible. While going through the process new innovative ideas are generated and recorded to help developing and expanding the business (Creative Strategy).

Illustration 6: Customer-oriented SWOT Model (Pierce & Giles, 1989)

For our archeological and forensic analysis we will be looking and doing the SWOT analysis at two points in time:

1. In 2003, when Friendster was launched in America and became very successfully.
2. Around 2006 when Friendster was at it's climax as a social networking site, but already having to fend off MySpace as well as increasingly Facebook.

The comparison of the analysis results of these two points in time will give additional insights in helping with our archeological and forensic investigation.

3.1 - SWOT Analysis for 2003: Lost Opportunities and Loosing Touch

Strengths in 2003

S1 First Mover - Friendster was the first modern Social Network website embracing new technology to allow users to easily set up their profile and link up with friends. Many of the technology underlying the unique features of social network websites were patented by Friendster and were subsequently acquired by Facebook (Gannes, 2010).

S2 Social Connectivity - When registering Friendster asked people to fill in detailed information such as: name, location, school, occupation, etc. This information made it easier for users to search and find friends they had lost contact to. This increased the perceived usefulness for Friendster users and the more people joined the more Friendster became useful to them.

S3 Increased Curiosity - The founder Jonathan Abrams had a clear vision for Friendster and he was able to stir up a large media attention for Friendster. People became curious and wanted to try a Online Social Network site for the first time themselves.

 Illustration 7: A profile of a friendster user (Unidentified writers, 2010)

Weaknesses in 2003

W1 Missing Social Interaction - After having set-up a profile in Friendster and having established contacts to friends the platform did not offer any further interaction capabilities (e.g. chats, various news feeds tailored to your interests, bulletin boards, etc.). Friendster also did not allow to set-up interest groups where Friendster users with the same interest could join and interact. Due to the lack active interaction possibilities existing users existing users lost interest in Friendster. The interactive social element got lost.

Illustration 8: Example of a Friendster user profile page layout (Unidentified writers, 2010)

W2 Lost Identity - Friendster allowed users to customize their user profile to their personality and mood using HTML. The fancy and colorful profiles quickly became a burden as Friendster started to loose its clarity of design and its visual identity.

W3 Technical Shortcomings - Friendster website became overwhelmed by the three millions of users that joined within months. As a result Friendster webpage took as long as 40 seconds to load, so users stopped using Friendster and moved to e.g. MySpace.



Image Source: http://www.windowserrorhelps.com/wp-content/uploads/2012/01/slow-pc-solutions.png

Opportunities in 2003

O1 Google's 30 millions - Google offered to buy Friendster for 30 million USD in 2003. The offer was rejected as Friendster thought that they were valued tool low. Instead private investors were brought in.

O2 Spread of the Internet - With the internet spreading fast more and more potential Friendster users came online every day. An almost unstoppable supply of new users.

Image Source: http://i1-news.softpedia-static.com/images/fitted/620x348/Google-to-Invest-1-Billion-in-Satellites-to-Spread-Internet-Across-the-World.jpg

O3 Technological Advances - Hardware and software were advancing at a break-neck pace. Computer got faster and easier to use while prices came down. Connecting to the internet got also easier and faster. This again was taping a new users groups and adding them as potential users for Friendster.

The browser technology was also developing and being standardized as the same time allowing for more interactive website that could be used by different browsers on different operating systems.

O4 Shift to Online Interaction - As the internet was spreading people started to get accustomed to interacting online. Especially the younger generations started authoring and sharing content on the web. Social Networking sites were providing the platform for that.

Threats in 2003

T1 Copy Cats - Friendster was the first modern social network site but the idea and concept of Friendster was easy to copy. Various competitors started to populate the social networking arena with MySpace starting to attract more and more users away from Friendster.

Image Source: http://cdn.business2community.com/wp-content/uploads/2011/09/3-ways-to-stave-off-digital-copycats.jpg

T2 Low Barriers for Move - Once other online social networking sites are up and gaining momentum there is almost no way to retain users if they decide to move. Once users have moved over they also tend to convince their Friendster friends to follow them.

T3 Advances in Technology - Advancements in web technology could make Friendster obsolete very quickly, especially if the competition adopts them at a much faster pace. 

Strategies in 2003

Matching Strategy: Strengths --> Opportunities
Friendster was successful tapping in the opportunities given by the spread of the internet with its first mover advantage in the modern social networking arena. As the media hype around Friendster started the user numbers went through the roof. The strategy would have been even more sustainable if they had addressed the technical difficulties by controlling the user numbers while addressing the technical problems. Instead after rejecting the offer by Google, the new management team started to loose touch and become complacent with the unexpected success.

Conversion Strategy: Weakness --> Strengths

There seemed to be a lock of awareness of the weaknesses Friendster was facing and no need of action was perceived. Instead of fixing the obvious technical shortcomings the management was focusing on what to do next. Friendster seemed also not able to understand how its users wanted to expand the usage of the platform (e.g. setting up of groups).
Even though Friendster was still going strong while not addressing these weaknesses it was laying the foundation for its future failure.

Image Source: https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhAmuBfsMXOBaV_cLtyiY7B2uwzKMp_g-bCvwPVYUZRHj9Jcjkfhlek_PHJx0ejx1WA-BqpGaRefVZTtTaQejwGe56TW5UOeDNxASKJaSrI0dCFzVwzncHkLzveCBhtjljDYS-Am8A6Cd8/s1600/Operations-management.jpg

Conversion Strategy: Threats --> Opportunities

Friendster saw the threats that their success formula was easy to copy and started patenting some the underlying technology used for their website. At the same though they did not seem to see the urgency of doing more than that and for example tapping in new possibilities the evolving technology was providing to them. We also think that they did not understand how easily users could move from one social network platform to another.

Creative Strategy
Friendster was creative and innovative in discussing possible extension of the Friendster platform to for example video calls. The failed though to execute on their creative strategy and prepare the Friendster for new innovative technology.

3.2 - SWOT Analysis for 2006 - Loosing the course

Strengths in 2006

S1 Patents - Event tough Friendster showing signs of disarray it still retained the patents to many of  the technology underlying social network design. This was giving Friendster still a marginal advantage over its competition. But for how long?

Image Source: http://hallingip.com/files/2011/06/US-PatentTrademarkOffice-Seal-300x300.png

S2 Loyal User Base - Despite all the technical difficulties earlier it Friendster still retained a loyal user base especially in Asia. This was a strong base to build on.

Weaknesses in 2006

W1 Legacy Issues - As Friendster delayed in addressing the technical difficulties and the user requirements for new functionality on the platform (like groups) it still was weakened by that perception in the eyes of many users.

W2 Lack of Consistency - With the many management changes and reshuffles since the founder Anderson was let go as the CEO, the staff at Friendster was experiencing a lock of consistency and direction. Many good people left Friendster as a result.

W3 Lack of Vision - With the founder Anderson gone and combination with the many management changes a lack of vision of Friendster emerged. The executive Friendster management themselves were not using Friendster and could not really formulate vision for Friendster's future. The investors who came in after Google's offer was rejected also had to be listened to.

Opportunities in 2006

O1 User Base - Friendster still have a substantial user base and especially in Asia. This presented an opportunity to remain relevant in the social networking space.

O2 A large Internet and still growing - The internet was still growing especially in Asia where Friendster was still maintaining a large user base. This growth offered opportunities to gain new Friendster users.

Threats in 2006

T1 Mushrooming of Social Networking - In 2006 social networking sites were mushrooming. Facebook after focusing on University campuses opened up to everyone and gaining quickly momentum. LinkedIn (founded at the same time as Friendster) had gone through its own ups and downs was focused on enabling business people to connect with other professionals. This strategy worked well two years later in 2008 when the economy was not doing well and job opportunities were scarce.

Illustration 10: Social Networking Wars (Unidentified writers, 2013)

T2 Micro Blogging - Microblogging emerged as another milestone towards "user-created content" (Anonymous, 2010). With microblogging everyone could become a broadcaster to the world. TwitterAn example of microblogging is Twitter. Below is an example of celebrity users that Twitter attracts.



Illustration 11: In comparison, Twitter was capable of attracting members with strong social influence

(Anonymous, 2010)

 

T3 Lack of Strong Connections - Garcia, Mavrodiev & Schweitzer (2013) analyzed the connections between the different users on Friendster and came to the result that many of the users weren’t connected to a lot of other members, and the people they had befriended came with just a handful of their own connections. So they ended up being loosely affiliated with the network and easy to loose.

Illustration 12: Friendster users gradually became less and less connected to one other another. (Image: Swiss Federal Institute of Technology adapted from McMillan, 2013)

Strategies in 2006

Matching Strategy: Strengths --> Opportunities

 

Strategy	Does the innovator have the required complementary assets	Likely height of barriers to imitation	Number of comparable competitors
Going it alone	Yes	High	Very few
Entering into an alliance	No	High	Moderate Number
Licensing the innovation	No	Low	Many

Table Adapted from Hill and Jones's 2010 book, Strategic Management, An Integrated Approach.

Based on this chart, we could see that the best thing for Friendster to do in 2006 was either to enter into an alliance or licensing the innovation. Given that the likely height of barriers to imitation was quite high, Friendster did the right thing to patent the technologies that support the operation of the social network site. Morever, there were only moderate number of comparable competitors, so the best thing Friendster could do was to enter into an alliance. Unfortunately, there were not many opportunity for Friendster to enter into alliance at that point in time.

 

Conversion Strategy: Weakness --> Strengths

The legacy issue had been solved but the lack of a clear vision and guidance did not produce new creative idea on where to move Friendster next. The competition was experimenting in new way to help people in interact and share, but Friendster was still stacked in their successful past. 

Conversion Strategy: Threats --> Opportunities
Friendster was busy not reacting or very slowly to the changing landscape in 2006 onwards. The still were not really fully aware of the threats looming and the continues success in Asia covered up for the mistakes they continue to make.

Creative Strategies

The lack of understanding of the users's need and the continuous changes in management an direction resulted in a lots of good staff and ideas lost over time. The founder figure of Anderson was gone and the management time was not able to give Friendster the needed creative ideas for new services and products hat could have halted the slow demise.

4 - Lesson Learned - How it could have gone differently

There is a tide in the affairs of men.

Which, taken at the flood, leads on to fortune;

Omitted, all the voyage of their life

Is bound in shallows and in miseries.

(Quoted from Shakespeare, Julius Ceasar)

Social network reflects "many of the wider changes in society"(Anonymous, 2010). Their popularity is linked to economic prosperity and "the rise of middle class consumers in emerging markets."

In order to seize this opportunity and get rich, it is necessary to note that timing is important for anyone and everyone who wish to make a fortune in the wave of prosperous online market. Friendster missed an opportunity, and lost its chance to become a more influential giant in the field of social networking service.

The prosperity of the internet-enabled social network service suggests that there is a real need from people to connect with one another. The challenge facing every company, therefore, is to balance between the profit-making and consumer demand satisfaction.

Illustration 13: This picture perfectly illustrates the state of the management when they reached 300 million users. (Illustration by Bruce MacPherson, adapted from Rivlin, 2006)

Moreover, as mentioned by Rivlin (2006), Friendster management felt they could relax when they had 300 million registered users. The founder of Friendster showed up in parties with beautiful women. The management stopped working hard. However, as pointed out by Peter Drucker (1998), "In innovation, as in other endeavor, there is talent, there is ingenuity, and there is knowledge. But when all is said and done, what innovation requires is hard, focused, purposeful work." This realization was particularly lacking in Friendster at that point in time.

 

5 - Verdict & Conclusions

After the archeological and forensic examination we can conclude that Friendster died slowly of a "success intoxication". The ultimate demise can be traced back the very beginning when Friendster missed to address the technical difficulties and respond to users needs to share and connect in various ways.

The user base in Asia kept Friendster alive a bit longer but the lack of vision by the new Friendster senior management after Anderson (the founder) had left, killed off the last opportunity they had to recover and survive.

Friendster failed to understand were the success was coming from, what the factors were that helped them to become successful and how those factors were changing due to their own shortcomings as well as the world changing around them.

The early success followed by Google's offer made Friendster very complacent and these can be seen as where the later failure was rooted.

Illustration 14: Picture adapted from "R.I.P.: Top 10 failed social media sites" (Wallace 2013)

Notes

Illustration 4 comes from http://www.friendster.com

References

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