For the past year, News Corp.'s (NWS, news, msgs) flagship Internet property has watched its fortunes steadily fade. Not long ago, MySpace was the dominant player in the online social-media space, but rivals have been stealing away users. Just two months ago the site lost its title as the world's largest social-networking Web site to rival Facebook.
MySpace also experienced a painful loss of revenue in the most recent quarter, and analysts expect more bad news. At this rate, the "place for friends" could soon find itself virtually friendless and barren.
"They are in a really deep hole right now," said Debra Aho Williamson, a senior analyst at eMarketer, an online advertising research firm. "It wasn't a good quarter for MySpace, and what you have seen since then is a snowball effect."
In the past year, Facebook's U.S. audience has grown 97%, to 70.28 million users, while MySpace's U.S. traffic has declined nearly 5%, to 70.24 million users, according to measurement company comScore. (Microsoft, the publisher of MSN Money, owns a small share of Facebook.)
MySpace brought many of its troubles on itself by focusing too much on revenue and alienating its audience. But, though MySpace's decisions may have led users to leave, Facebook made it easy for them to jump ship.
In an interview with TheStreet.com, published this month, News Corp. CEO Rupert Murdoch admitted that he shared some of the blame for letting the site get out of control.
"The business sort of grew out of control and really out of size," said Murdoch. "I blame myself, and it had to be brought back in size."
More from MSN Money
Mistake No. 1: Clutter
News Corp. had dollar signs in its eyes when it set its sights on MySpace. Murdoch's media empire purchased the popular site for $580 million in 2005 because it wanted to cash in on the growing global market for online advertising, then projected to reach $65 billion by 2010. (A more recent projection for ZenithOptimedia is for about $60 billion.)Under News Corp., MySpace reached profitability in less than two years, mostly through aggressive use of display advertising.
With the ads, however, came clutter and annoyances that sent many users packing. MySpace members were frequently greeted with a landing page wrapped in advertisements. Banner ads urging users to create avatars or obtain credit scores flashed constantly on users' personal pages. At the same time, spammers took advantage of lax privacy controls to flood strangers' inboxes with sales pitches.
"I got rid of my MySpace ages ago, when I got sick of the ads," wrote Jessica in a May 4 response to a New York Times blog titled "Do you know anyone still on MySpace?" Her comment echoed the sentiments of many others.
As users fled, MySpace began making improvements. The company implemented better e-mail controls to cut down on spam and rolled out an improved ad-targeting system in an effort to get users to view marketing messages as useful rather than annoying.
But much of the damage was already done.
MySpace developed a reputation as "the ghetto of the digital landscape," said social-media researcher Danah Boyd, a fellow at Harvard's Berkman Center for Internet and Society and a Microsoft researcher, at an industry conference.
Facebook, meanwhile, garnered a reputation as more sophisticated, due in part to its plain background and smaller ads.
Analysts predict that MySpace will bring in $495 million this year, far less than the $585 million it earned in 2008. In response to the challenging ad market and fall in traffic, MySpace announced last month that it would lay off 30% of its U.S. staff. The company also got a new CEO recently.
Video on MSN Money
Murdoch's MySpace messMySpace has lost 'mindshare' to Facebook, leading to layoffs and a shakeup of top management.
Facebook is not flawless
To be sure, Facebook has suffered some of the same criticisms as MySpace. Facebook famously reversed course and apologized after users threatened to boycott the site for social ads that broadcast what users deemed personal information to marketers and others on the site.But Facebook appears to have survived its missteps relatively unscathed.
"Sure they screwed up by parading our life to the whole world," wrote Bethany Noel Smith, a Facebook and MySpace user on a group dedicated to publicly accepting the site's apology. "But . . . we forgive you."
Facebook also added to its privacy controls after its indiscretions. As users were able to better segment their social contacts and control the information various groups could see, Facebook's growth accelerated, said Debbie Frost, Facebook's director of international communications.
Facebook has continued to add privacy controls. On June 24, the company began testing an option that allows users to select who can see individual posts. Users can choose to allow posts to be seen by anyone or just by individual friends or groups of friends.
"Granular privacy controls are fundamental to the site," said Frost, adding that the site would not have seen the growth among older adults without such features. In the past year, Facebook has increased the number of visitors 35 and older more than 23%, according to research firm Hitwise.
MySpace also has privacy controls, though they are somewhat less robust. Users can share information with friends and block individual users from seeing their profiles. But they can't decide which friends see what. MySpace's 35-and-older audience has decreased about 2% in the past year, according to Hitwise.
Continued: Too much focus abroad
Rate this Article
High