MySpace Losing Market Share, Money, Hope

MySpace and Facebook are often pitted against each other as fierce competitors, with MySpace taking the grandfather role in the social-networking space -- older and nearer to death, that is. But the two sites got off to different starts, with MySpace looking toward profitability from the beginning and Facebook still confused about what this "profitability" thing is, anyway.

Yet, despite being owned by News Corp. (NYSE: NWS) (or as a result of this) and an ad agreement with Google (Nasdaq: GOOG), MySpace has been flirting with its own irrelevance from a user standpoint for some time, and there's reason to suspect the writing is on the wall for the once-popular leader in the social-networking space.

To be sure, while it's No. 2 globally, MySpace still has the most market share in the United States. But data from Hitwise released this week portrays a bleak outlook. While year-over-year visits to Facebook grew 149 percent in the U.S. as of February '09, visits to MySpace decreased 28 percent.

Further, in another sign that success may not be imminent for the site, MySpace lost three of its execs in February -- Amit Kapur, chief operating officer; Jim Benedetto, senior vice president of engineering; and Steve Pearman, senior vice president of product strategy -- who jumped ship to join a startup.

Nevertheless, MySpace has a new focus these days: its year-old music platform, which will soon allow users to purchase band merchandise and concert tickets. This platform is intended as another source of revenue for the site.

But at this point is its music platform enough to save MySpace?

MySpace CEO Chris DeWolfe seems to think so. Speaking at the Web 2.0 Summit in November, DeWolfe even suggested MySpace Music could become a true competitor to Apple's iTunes because of its emphasis on community (everyone still loves this, yes?), and particularly if it releases a device of its own.

And in a recent interview with BusinessWeek, DeWolfe emphasized that the site's focus with this platform will be on profitability, as it has been from the beginning. "I don't know Facebook's profitability... but if I could have 300 million people using MySpace or be profitable, I would take profitability," he told the BusinessWeek reporter.

While its focus has been on profitability, it certainly hasn't mastered the art of monetizing social networks. And market rumors claim that Google may not renew its ad deal in 2010 due to underperformance of its search ads -- a deal which reportedly represents a third of MySpace's revenue, or around $300 million per year.

Weeding through the spin, with Facebook leading worldwide and quickly capturing U.S. market share, and Apple in firm control of digital music, MySpace may see its relevance in the space dwindle, becoming less attractive to advertisers. And with DeWolfe's contract up this year, perhaps a restructuring on the corporate masthead as well.

? Nicole Ferraro, Site Editor, Internet Evolution