Facebook – Myspace = 100% revenue share

Josh at Redeye VC has some *excellent* points about the coming big battle between Facebook and Myspace for web developers:

If you ran a venture-backed company and had to decide whether you wanted to focus your effort on: (a) a property that welcomed you in and let you keep 100% of the revenue you generate or (b) a company with a vague policy that doesn’t let you generate any revenue, which would you choose? I don’t think it’s even a decision. It’s an IQ test.

However, it is significant that Myspace remains far larger than Facebook in terms of a user base and also important is that users, not developers, have driven the success of Myspace.

Facebook is hard to analyze because until very recently they had a much more restrictive policy on new accounts, opening them only to groups associated with businesses or universities. To join Facebook I initially had to contact my old alma mater – University of Wisconsin – to get an alumni email set up, then redirect that to my current mail. No big deal but certainly a barrier to entry. Facebook now (wisely) has opened itself up to everybody and (also wisely) is pursuing a very open approach to API usage and social media. Most importantly Facebook is going to allow those who build applications around Facebook to keep 100% of the revenue those create.

I think this “100% revenue share” is a brilliant approach because the Facebook “whole” will be much greater than the sum of these parts. Thus Facebook can make a *lot* of money through the extra traffic and advertising created by websites and developers and users gravitating to the Facebook social media ecosystem. The loser in this equation would be Myspace and other sites (that would be MOST sites) that try to create social media environments but don’t share much of the revenues.