Bad news for News Corp. (NYSE:NWS): MySpace, once the nation's dominant social network, is on a fast track to digital irrelevance.
The numbers aren't encouraging. Researcher comScore says that MySpace had 71 million unique U.S. visitors in April, versus 67.5 million for Facebook. A year ago, MySpace had more than doubled Facebook's visitor count: 72.2 million vs. 35.7 million
Not just a Jeremy Irons movie
Talk about a reversal of fortune! How did it happen? My sense is that MySpace failed to become a platform. Software developers flocked instead to Facebook, which put up cash to help fund businesses whose software would work inside its service.
Some of those developers are profiting handsomely. Mob Wars, a Facebook game created by David Maestri, was producing $22,000 a day in revenue last summer. At least one blog now speculates that Mob Wars generates $1 million in revenue per month. Such numbers help to explain why Facebook is on pace to generate as much as $500 million in 2009 revenue -- it's a console, the social media equivalent of Microsoft's (NASDAQ:MSFT) Xbox, Sony's (NYSE:SNE) PlayStation, or Nintendo's Wii.
MySpace, by contrast, is seeing development activity decline weekly, according to blogger TechCrunch. We don't know where the coders are headed, but Facebook and Twitter seem to be likely options.
Especially Twitter. New data from comScore says that the site attracted 32 million global visitors in April. Wowza.
Buffett is right
In recent months, a former Facebook executive, Owen Van Natta, has replaced MySpace founders Chris DeWolfe and Tom Anderson. Page views continue to slide, and next year, a revenue-rich partnership deal with Google (NASDAQ:GOOG) is set to expire. Warren Buffett is right: When a superstar can be displaced this easily, you're crazy to buy tech.
Unless, that is, you're betting on platforms. Go back to what I said about Facebook. Whereas MySpace is a site, Facebook is a moneymaking opportunity for coders -- a platform supported by an entire ecosystem of interested parties, rather than visitors alone.
So if you plan to buy tech, buy platforms that feature these three traits:
1. Commitment
Customer commitment is obviously important, and it's one feature MySpace never lacked. Millions of users flocked to the site to post photos, find friends, and share ideas. Among public companies, Netflix (NASDAQ:NFLX) engenders similar loyalty, and it's eating up DVD rental market share as a result.
2. Innovation
For Motley Fool Rule Breakers recommendation salesforce.com (NYSE:CRM), innovation is a competitive edge. But in this case, the company's not the only one innovating. Thousands of developers have created new software for salesforce.com in a market called AppExchange. Each widget enhances the platform and encourages further development, widening the company's already generous moat.
3. Profits
Historically, no platform has ever equaled Windows as a profit maker for coders. Today, Apple's (NASDAQ:AAPL) iPhone App Store is threatening to become Windows-like in its ability to confer wealth upon programmers. As a result, developers are flocking to the platform.
MySpace is a cautionary tale for tech investors, sure. But it needn't be the deterrent to tech investing that Buffett advises. History shows that platforms such as Windows have created massive wealth for developers and investors alike, a trend that probably won't change anytime soon. Invest accordingly.
Get your clicks with related Foolishness:
- Take heed of these two truths of tech investing.
- Millionaire-maker stocks are still out there.
- Facebook is great, but Twitter is better.
