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It's hard to say that Rupert Murdoch's $550m acquisition of MySpace in 2005 wasn't a savvy move. Last year alone, despite missing revenue targets, MySpace pulled in more revenue than Murdoch paid to acquire the popular social network.

But all does not appear to be well at the world's second-largest social network. Despite the fact that under News Corp., MySpace has become the best-monetized social network, it has lost significant ground amongst consumers. Last year Facebook surpassed it as the world's largest social network and it's poised to become the largest social network in the United States as well, a country that MySpace had previously dominated.

In the buzz category, Facebook and other hot social media properties like Twitter still gobble up media attention, MySpace doesn't seem to be generating a whole lot of excitement these days.

With payments guaranteed to it under its search deal with Google set to end in 2010, it's unclear if MySpace will start to lose out in the monetization category as well.

The media has been bearish of late when it comes to MySpace and the news that three MySpace executives have departed the company is perhaps the strongest sign that people within the MySpace organization are losing confidence in the company's prospects.

MySpace's COO Amit Kapur, SVP of Engineering Jim Benedetto and SVP of Product Strategy Steve Pearman have all left to start their own venture.

In a staff memo obtained by TechCrunch, MySpace CEO Chris DeWolfe wished the trio the best of luck but reiterated that he was still as confident as ever about MySpace's future:

Despite what the market tells us, 2009 will be a big year for our business.

Tom and I want to reiterate how passionate we are about MySpace—we love the people, the product, and we believe in the future of the company. MySpace has a dedicated team of senior executives and I’d like to take the opportunity to spotlight some of these individuals. I encourage everyone to get to know our executive team as they are an enormously capable group of professionals from successful media and Internet powerhouses such as eBay, Yahoo!, MTV, and Symantec that will lead our company into its next phase.

DeWolfe's memo sounds reassuring but these things always do. The bottom line is that three key people at MySpace all felt that starting their own venture (in the midst of a recession no less) provided a better opportunity. No matter how you look at it, that doesn't inspire confidence.

Personally I think it's interesting to watch the development paths taken by MySpace and Facebook. Both companies have come a long way in a short period of time in the same space but have taken very different paths.

Facebook has managed to stay relevant with users and is only growing in popularity. But its financial future is anything but sure and it has to figure out monetization before its popularity turns into a problem.

MySpace, on the other hand, impressed with its finances but has not been able to match Facebook in the staying relevant category. That may put its financials at risk and it may also make it more difficult to retain key employees.

Which company will come out ahead? Maybe both. Maybe neither.

If there's anything I take away from this it's that sometimes you have to do everything right. You can't focus on the bottom line but lose focus on your product. At the same time you can't focus on the product and ignore the bottom line. 1 out of 2 probably doesn't cut it. Right now MySpace and Facebook are both batting .500.

Patricio Robles

Published 4 March, 2009 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

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Comments (1)

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Tracy Hill

These are painful times and nobody likes to hear that a company is experiencing difficulties, but I think that Myspace needs to seriously reconsider its direction. Myspace changed the world when it hit the scene, but like Yahoo to Google, somewhere along the way it lost its innovation. Everyone I know at one time had both a Myspace and Facebook page, but now they only seem to be using their Facebook accounts. To use a television analogy, I have always thought that Myspace was like network television and Facebook like PBS/cable. I watch both, and they each serve a different purpose. However, like much of network television, Myspace has lost sight of why their users initially joined their site. If Myspace was being guided in the right direction, there would be no issues with Facebook because the two social networks serve different purposes and aren’t mutually exclusive. I still believe that as a mass market delivery network, Myspace has great potential.

For example, as someone that is knowledgeable in both online and music, I believe that Myspace Music has been a total squandering of an opportunity with enormous potential. Myspace Music’s opportunity is not in selling downloads yet because they haven’t established themselves as a music/entertainment brand, contrary to what they believe. Myspace Music joined a crowded field and has done nothing of significance to differentiate itself from the pack in the minds of their enormous user base. Myspace’s “if we build it they will come” mentality with regard to Myspace Music is sorely mistaken. Myspace users have always been able to stream music so that’s not a big deal to them. And certainly putting a button that allows users to buy music on the player is not enough to call it a major music initiative. When Myspace made the announcement about Myspace Music, I was so excited to see what revolutionary new things they would unveil, but when I actually saw Myspace Music, it was like, “Oh, that’s it?” I think many of their users felt (and still feel) the same way. If Myspace Music had the benefit of being a division of the company that created the greatest music device in the history of mankind like iTunes, then they could afford to be lackadaisical about brand building, but they don’t have that luxury.

I have always believed that Myspace Music’s real utility is in being a one-stop music community that connects its users with the numerous bands on their social network in a meaningful way. Currently, they aren’t doing that at all, which is why they also haven’t been able to connect their advertisers with their users in a way that is relevant to the users. For example, here are just a few completely obvious examples of how they could really be of value to their users as a one-stop music community. First, add online radio streams as iTunes has done. Myspace should have advertising supported radio streams by genre that give information about the artist that is playing and that links to the artist’s Myspace profile on the pop-up Flash player. In addition to having streams with already established artists (to pull users in), they should also have streams with the best new major label bands, indie bands, and great unsigned bands on Myspace to actually make it EASY for Joe Myspace user to hear their favorite artists and discover new music (essentially becoming a global Clear Channel Radio). Secondly, add a weekly in-studio live performance show. Myspace is owned by Fox. Fox has major soundstages in Los Angeles and I’m sure that one of the soundstages on the Fox lot is empty. Myspace Music should tape an intimate live weekly performance show with the biggest artists on Myspace Music (reminiscent of VH-1’s Storytellers). It should be the place where established bands come to play live to debut songs from upcoming releases (globally), or in Bruce Springsteen’s case, come to remind some of Myspace’s younger users why he still kicks butt, and a place where good up and coming Myspace bands have a place to break (again, offering sponsorship positions throughout the program to connect advertisers with Myspace users in a relevant way). Lastly, I can’t even go to Myspace Music and get my music news. What’s up with that? They need to add a music news aggregator. Myspace Music has a billion opportunities, they just need to use them.

I think Myspace still has a world of potential so it will be interesting to see what the management changes will bring.

about 7 years ago

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