Real Case of Disruptive Innovation

7th October 2013

IntroducJon to Science/Technology Based Business

DISRUPTIVE INNOVATION IN REAL CASE (Friendster, Inc. vs Facebook, Inc.)

Made by: Azalia Zatadini 0131131001 Claudia Arryana 0131131399 Ersha Egrianto 0131131375 Gavin Ali Suryanto 0131131411 SebasJan Alex Dharmawangsa 0131131309

INTRODUCTION TO SCIENCE / TECHNOLOGY BASED BUSINESS S1 BUSINESS PRASETIYA MULYA BUSINESS SCHOOL 2013

IntroducJon to Science/Technology Based Business

7th October 2013

I. Technology Involved The technology that is involved in this brawl is social media. Social media era first kicks off as GeoCiJes started their service as a free website maker on end-­‐1994. The idea to build up GeoCiJes was made by BHI (Beverly Hills Internet) which was also their very first name. This website, made just a year a[er the world wide web technology made by Tim Berners-­‐Lee was donated to the world by CERN, enables it’s users to interact with each other by using “ciJes”. “CiJes” are online groups named a[er a real place that discusses about a same issue or interest, thus users are less likely to know each other before entering Beverly Hills Internet, or now called GeoCiJes. Users do not have a preset profile page or home page, in GeoCiJes users are asked to create and design their own homepage in respect to the “ciJes” they have listed their website page on.

Then, what exactly is social media? According to google’s dicJonary, social media would mean the use of dedicated websites and applicaJons to communicate informally with other users, or to find people with similar interests to oneself. Then, this would be true for GeoCiJes at that Jme. But in 1999, during the rise of web 2.0, social media has changed into the terms: means of interacJons among people in which they create, share, and/or exchange informaJon and ideas in virtual communiJes and networks. Why could it only be in the rise of web 2.0? Web 2.0 offers a very different type of internet use, in web 2.0 the flow of informaJon is not just from the server to the user but also from the user of the web service to the web server. This enable the users to share with each other informaJon, media, messages, etc. It is not unJl the year 2002 when the major breakthrough of this web 2.0 started as wikipedia.org (part of Wikimedia FoundaJon, Inc.) started as the world’s largest wiki and let people type in any kinds of informaJon as the source for other user’s knowledge, generaJng the true meaning of web 2.0.

Nowadays the usage of social media is on the top list of internet usage breakdown at workplaces, schools, public internet services, etc. Most of the users of social media are female (female 71% compared to male in 62%) and young adults from 18 to 29 years old (83% of all ages). But this also corresponds to the large internet users increase from 2002 to 2012, from 9.1% of world populaJon to 33% of all the world’s populaJon. The total of internet usage also rose from 46 minutes a day in 2002 to average of 4 hours a day on 2012, although usually teenagers to young adults of urban areas do more than those. On 2002 when Friendster started it had a large (at that Jme) amount of users, 3 million in total. Whilst last year, Facebook sJll reigns with ~900 million users.

In the U.S. alone, total minutes spent on social networking sites has increased 83 percent year-over-year. In fact, total minutes spent on Facebook increased nearly 700 percent year-over-year, growing from 1.7 billion minutes in April 2008 to 13.9 billion in April 2009, making it the No. 1 social networking site for the month. - Nielsen Holdings N.V. This usage of social media, internet in general, by teenagers to young adults of urban areas who are always thirsty for change and innovaJon requires the social media providers to keep understanding their changing trends to be able to survive in this very unstable market demand. So this is why we are intrigued to research and discuss on this maler further. Especially on the Facebook vs Friendster brawl that has led to a complete victory of Facebook, forcing Friendster to make a complete shi[ in their purpose to sJll be able to survive.

IntroducJon to Science/Technology Based Business

7th October 2013

II. Ini1al Market Leader (Friendster)

Friendster started on the year of 2002 by a Canadian computer programmer, Jonathan Abrams. It was originally funded with a $12 million investment by Kleiner Perkins Caufield & Byers, Benchmark Capital, and other private investors. Friendster is one of the first social networks that could alain more than a million members, where by it was able to grow to 3 million users in only three months.

Much like GeoCiJes, Friendster’s profile page are able to be customize by the user according to their creaJvity. Also, users are able to put in different apps or widgets into their profile pages to make it more alracJve or to make it more personalized. Friendster has been an open site since August 2006 when it first allow widgets and content to be embedded in user profile pages through its developer program.

About 39 percent of Friendster's users have widgets on their profile on this Jme.

A[er allowing the usage of widgets on profile pages, Friendster hasn’t really create any more interesJng features. Unlike it’s newly born compeJtor who are now (year 2006) open to all people ages 13 and over, Facebook, who started to put in the ability to play games or comment on every single posJngs.

This lack of new innovaJon has make users make the switch from Friendster to Facebook. Some group of people thinks that this incident wouldn’t happen if Friendster, Inc. would welcome google’s offer of $30 million buyout on 2003, which Friendster decline.

A[er it’s almost total defeat to Facebook, Friendster has reposiJoned itself into a social gaming site and disconJnued user social network accounts. Friendster said that in the new and improved website, the focus will be on pure "entertainment and fun", and aims not to compete with, but rather to complement Facebook. Right now Friendster is based in Kuala Lumpur, Malaysia with traffic coming mostly from gamers in the Philippines and other South East Asia naJons.

III. Pioneer Company (Beverly Hills Internet, then GeoCi1es)

GeociJes started as Beverly Hills Internet on late-­‐1994 by David Bohnel and John Rezner. Users in GeoCiJes are registered in their respecJve “ciJes”. “CiJes” are online groups named a[er a real place that discusses about a same issue or interest. Users do not have a preset profile page or home page, in GeoCiJes users are asked to create and design their own homepage in respect to the “ciJes” they have listed their website page on. In May 1997, GeoCiJes started on introducing adverJsements on its pages.

Despite negaJve reacJon from users, GeoCiJes conJnued to grow. By June 1997, GeoCiJes was the fi[h most popular site on the world wide web.

On January 1999, GeociJes was purchased by Yahoo! for $3.57 billion in stocks, where previously it was hugely invested by Yahoo. This choice was hugely unpopular and made GeoCiJes lost many users in an en masse leave. The main problem to this huge leave was the new terms of services, which enJtles Yahoo! to all the rights and contents (including pictures) of all GeoCiJes users.

A[er long period of loss and lack of new innovaJon (one Jme it declared $8 million loss on final quarter of 1998), on April of 2009 Yahoo! announced that GeoCiJes is finally to close on 26th October 2009.

With the closure of GeoCiJes in the U.S., Yahoo! no longer offers free web page hosJng except in Japan (the only country where GeoCiJes is sJll acJve unJl today).

IntroducJon to Science/Technology Based Business

7th October 2013

IV. Current Market Leader (Facebook)

Facebook started in the year of 2004 as Harvard College’s internal students connecJon site called as theFacebook.com. This site was created by then Harvard pupils: Mark Zuckerburg, Eduardo Saverin, Andrew McCollum, DusJn Moskovitz, and Chris Hughes. Facebook is an online social networking service where users can create profiles with photos, lists of personal interests, contact informaJon, and other personal informaJon. Users can communicate with friends or others with private or public messages and a chat feature.

Facebook was first designated only to Harvard students. But then it spreads to other Ivy League UniversiJes, unJl finally most of universiJes in the U.S./Canada area. On September 2005 Facebook.com, whose domain was bought for $ 200,000.00 on 2005, expanded their services to high schools in the said region. And finally on 26th September 2006, it was open for everyone from the age of thirteen having a valid email address. By late 2007, Facebook had 100,000 business pages, allowing companies to alract potenJal customers and tell about themselves. Traffic to Facebook increased steadily a[er 2009.

Different from Friendster or GeoCiJes, users are not able to edit or customize their profiles or homepage layout. This actually creates a much simpler use. Also, Facebook allows it’s users to play games with other users online, which now they also generate cash from these in-­‐app purchases.

Facebook’s innovaJon didn't stop there, on March 2011 it was reported that Facebook removes approximately 20,000 profiles from the site every day for various infracJons, including spam, inappropriate content and underage use, as part of its efforts to boost cyber security. In July 2012, Facebook added a gay marriage icon to its Jmeline feature. This shows that Facebook always understands the current world issue of the Jme. The move that Facebook makes, makes the news and widespread in a ‘free-­‐adverJsement’ way and these movement actually creates trust on users and also adverJsers.

Lastly, the reason why Facebook doesn’t gets boring is because when other new websites spurs, Facebook take that as an opportunity to show again to the world another innovaJon. Like the latest new product Graph Search. Graph Search provides users with a "precise answer" rather than a link to an answer by leveraging the data already present on the site. Also they seldom change in homepage or profile design making users not bored about the layout they offer.

V. Conclusion

Social media users typically comes from young adults from metropolitan areas, these people are the types of people that has an every changing tastes and demands. We believe that Friendster has lost from Facebook due to it’s over confidence that it will prevail in the market. Also, Friendster’s lack of innovaJon has made it very vulnerable compared to it’s always innovaJng’s rival Facebook. If Friendster sJll lack on innovaJon or awakening towards it’s market demands it could, in the near Jme, closes down like most of the GeoCiJes sites.

SOURCES: -­‐ en.wikipedia.org -­‐ mashable.com -­‐ mediabistro.com -­‐ Nielsen Company -­‐ uncp.edu