This Is What Really Killed MySpace

One thing is for certain: Internet consumers are fickle.

In 2007, MySpace was on its way to becoming the greatest thing since sliced bread. The company -- originally owned by Intermix Media and purchased by News Corp. (Nasdaq: NWS  ) in 2005 for $580 million -- boasted 70 million unique visitors a month and, according to eMarketer, perhaps as much as $600 million in revenue derived from ads at its peak.

Flash forward to today, and MySpace generates perhaps one-third of the revenue it once did. Subscriber growth has turned into a slow burn rate, and Facebook has not only eclipsed MySpace in terms of cumulative users but has effectively stomped the service into oblivion.

The question has been posed plenty of times: "What really killed MySpace?" There's never really been a compelling answer, but I think there were three faux pas that may have contributed to its demise.

1. News Corp. didn't understand MySpace's user base
One of the most basic but often overlooked possibilities of what really killed MySpace is News Corp. itself. Rupert Murdoch is accustomed to being king of the hill, but his company didn't know the first thing about running a social-media website. Catering to the television audience and getting users to stay on your website are two completely different ventures. Murdoch took them as just one.

2. Users had too much control
It's my contention that Facebook is able to maintain steady subscriber growth while MySpace fell to the wayside because of the way in which each site handles its user base. Facebook does allow the individuality of its users to be apparent on their profiles, but users are limited to one platform and one page design. MySpace allowed nearly limitless user customization, which created hundreds, perhaps even thousands, of platforms, making the site at some points impossible to navigate. Without one cohesive image, users quickly lost interest in MySpace.

3. Little to no barrier to entry
One factor working against all social-media websites is the relatively low barrier to entry. As long as you have the starting capital, you can have a social-media website. Google (Nasdaq: GOOG  ) announced its intentions to enter the social-media fray this week, while countless others, including Renren (NYSE: RENN  ) and Quepasa (AMEX: QPSA  ) , have been around for years. Facebook's success will only translate into a greater amount of social-media startups -- and probably more companies that go the way of MySpace and Friendster.

Whether one or all of these factors contributed to MySpace's demise is irrelevant now, with the company being sold this week for a measly $35 million to advertising network Specific Media. We'll see whether Specific Media can turn this former social-media giant around, but history has shown that once a media outlet falls out of favor, it's very unlikely to be mainstream ever again.

Do you think Facebook can avoid MySpace's mistakes? Share your thoughts in the comments section below and consider adding social-media upstarts Quepasa and Renren to your watchlist to keep up on the latest news in this sector.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong. The Motley Fool owns, and Motley Fool newsletter services have recommended buying, shares of Google. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy that makes you want to click the "like" button over and over.


Read/Post Comments (6) | Recommend This Article (13)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 03, 2011, at 8:58 PM, wrtraxler wrote:

    Another big reason is that Facebook has tons of games to play for free. This alone is the biggest draw for Facebook users, don't believe check the numbers on Cityville, Mafia Wars, etc. If Google+ offers what Facebook offers and includes a few new features then Facebook could go the way for MySpace.

  • Report this Comment On July 04, 2011, at 11:41 AM, nunyabizniz wrote:

    Myspace was ugly, slow and overly-commercialized. It was the commercialization that killed it.

  • Report this Comment On July 04, 2011, at 11:49 AM, SM0KY wrote:

    After having used the site for years with success, I found things more and more not working after the Fox takeover. Perhaps the folks who understood the code left at the takeover, or were discarded by the new owners. Every time I wanted to update my page, the updates wouldn't work, and I had to consult 'help', who very often couldn't help. After a few months of this, I bailed out in favor of Facebook, as did everyone else.

  • Report this Comment On July 04, 2011, at 10:12 PM, Shaneypoo wrote:

    In response to your number 2 "Users had too much control" was actually the best feature MySpace had and NO that wasn't the reason MySpace died, no no no!

    Teenagers loved that feature but the adults didn't because they weren't as fond with technology as kids are, what killed it was the advertisements and how MySpace continued to update their website for no reason, there were too many updates and advertisements throughout the website and people obviously got over it and moved to Facebook because Facebook never updates their site but adds additional social features like "groups", "tagging pictures", etc. and Facebook isn't exploited with advertisements like MySpace was.

  • Report this Comment On July 04, 2011, at 10:51 PM, chadscards1274 wrote:

    I will only comment on why my wife and I switched to Facebook. First the find your friend feature on Facebook wasn't something that you could do on MySpace and if it was I did't know it. Second the user pages were too customizable and while some people might have liked it there was so much "crap" - background designs, music that started playing automatically, endless stuff and it could get hard to read. When you look at a Facebook page it's pretty much based on conversations and pictures with some video. The games came along after because of the popularity of the site.

    There is a huge moat that Facebook has built. Think about it, if 10 of your close friends are all on Facebook as well as your whole family there is going to have to be a great reason for all of you to switch to another site. Someone may build a better mousetrap so to say, but the site has to be so much better that not only you want to switch; but you can also convince your social circle to all change.

  • Report this Comment On July 05, 2011, at 6:09 PM, Borbality wrote:

    I think facebook has the whole facebook thing (pictures, comments, etc) locked up for a while. What will replace it will be seamless communication directly from phones, I would bet.

    Why does a phone need to take you to another website? Just put all that data into someone's phone number and boom. I don't think facebook will be that relevant forever, but it's probably got a while to run, and could continue to stay popular with the older PC crowd for a long time.

    Sites like Google+ need to add something new, and not just new as in being part of gmail. Maybe there should be a whole consumption based site. We're all consumers and buy stuff constantly. Who knows.

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