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Myspace Collapse: How The Social Network Fell Apart

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MYSPACE

Tom's not anyone's friend anymore. Myspace, the once illustrious hub of social activity, shameless C-list celebrity boosterism, and a go-to roost for most musical acts, is being sold at a huge loss by parent company News Corp.

Just over three years ago, in the spring of 2008, Myspace was top dog. That April, the upstart Facebook grabbed the lead and never looked back. In those three years, Myspace has lost over forty million unique visitors per month, lost both co-founders, laid off the vast majority of its staff and more generally, has diminished to a cluttered afterthought of the power it once was.

But how did things sour so fast? Critics point to Myspace's consistent administrative and strategic blunders combined with a seeming inability to evolve with the social web it had helped inaugurate. That social web that would come to be more and more dominated by rival Facebook, leaving Myspace scrambling to keep up.

"Myspace was created by people in the entertainment industry, not by technology gurus, therefore they could not innovate at the pace that they needed to compete," Connie Chan, an analyst with Chess Media Group, told HuffPost in an email. "So when Facebook came on the scene, a newer better way to network with your friends surfaced - Facebook offered something as basic as being able to actually see your real friends vs. anonymous friends."

Founded in 2003, Myspace quickly took off and was purchased by News Corp in 2005 for $580 million. By 2006, Myspace was the top social network in the country. A few years later, it would cede the position to Facebook, which opened up its site to all comers in September 2006, and would overtake Myspace in April 2008.

But the adoption by News Corp didn't help much either. Rupert Murdoch--once enthralled by his new buy--soon turned his attention to pursuing the Wall Street Journal.

"Culture is changing and quickly enabled by technology," said Chan. "News Corp's old school thinking and probably red tape were also factors in Myspace's fall."

"We've got to admit that, in the last 3 or 4 years, we made some big mistakes," Murdoch said last spring of Myspace.

In an interview with Businessweek, former founder Chris DeWolfe blamed Myspace's overenthusiasm and underexecution on the product side for many of the site's problems.

"We tried to create every feature in the world and said, 'O.K., we can do it, why should we let a third party do it?' " said DeWolfe. "We should have picked five to ten key features that we totally focused on and let other people innovate on everything else."

Instead, Myspace unleashed a slew of products that were buggy and dysfunctional, confusing and alienating users while failing to compete with Facebook's own progress.

"[Myspace failed] to execute the product development," former Facebook president Sean Parker said in a recent interview. "They weren't successful in iterating and evolving the product enough, it was basically this junk heap of bad design that persisted for many, many years. There was a period of time where, if they had just copied Facebook rapidly, I think they would have been Facebook. The network effects, the scale effects were enormous. There was so much power there."

Unlike Facebook, which started to let third-party developers create apps on the site in 2007, Myspace held tight to the notion that it would be able to create its own products for some time. It took almost a year after Facebook had made the move for Myspace to finally agree to let developers onto the site. Of course, apps--including popular social games like Farmville--have contributed greatly to Facebook's success.

Back in 2006, News Corp's chief operating officer Peter Chernin demonstrated Myspace's blindness to the changes going on around them.

"If you look at virtually any Web 2.0 application, whether it's YouTube, whether it's Flickr, whether it's Photobucket or any of the next-generation Web applications, almost all of them are really driven off the back of Myspace," Chernin said, according to ReadWriteWeb. "Given that most of their traffic comes from us," he said, "if we build adequate if not superior competitors, I think we ought to be able to match them if not exceed them."

According to Businessweek, the pressure to drive revenue, when other startups were using the luxury of venture money to create and explore, stifled the possibility that Myspace would have the breathing room it needed to innovate. Instead, executives were focused on trying to raise advertising profits--a mission that only intensified when, in 2006, Google paid $900 million for a three-year advertising deal contingent on the site's traffic.

"There was a lot of pressure to drive revenue," Shawn Gold, Myspace's former head of marketing and content, told Businessweek. "There were things that we knew would be more efficient for the user that we didn't act on immediately because it would reduce page views, which would have hurt the bottom line."

"When we did the Google deal, we basically doubled the ads on our site," DeWolfe said. Compared to Facebook's streamlined offering, the ad-congested, overwhelmingly brash layout of MsSpace was an eyesore.

Myspace was also dealing with a public image problem. The network had started to flood with scantily clad would-be celebrities, filling the site with highly sexualized photos that led to the site's tarnished reputation as a hotbed of obscenity. In February 2006, a Connecticut investigation into whether Myspace was exposing minors to pornography cemented public opinion that Myspace wasn't safe.

Researcher Danah Boyd compared user migration from Myspace to Facebook to white flight, making the case that Myspace had come to be regarded as a "digital ghetto," whereas Facebook was a safe haven for more elite users.

Ironically, Myspace's desperate attempts to recoup its former success came in the form of imitating Facebook, a site it'd once tried to set itself apart from. It adopted the news feed Facebook had popularized, and neatened up the site itself in a way that also suggested it was taking visual cues from Zuckerberg's page. In November 2010, the site integrated with Facebook Connect, calling it "Mashup with Facebook."

Myspace's last ditch attempt was in rebranding itself as an entertainment hub, playing to the strengths it still had. Plenty of bands still used the site as their primary method of broadcasting to fans. According to Reuters, Myspace CEO Mike Jones made it clear that the site was no longer competing with Facebook directly, and would instead try to provide a complementary service.

But it simply wasn't enough. The site, which has lost over a million users a month on average in the past two years, was clearly in shaky shape. Co-founders DeWolfe and Tom Anderson left the site in 2009. Replacement Owen Van Natta departed less than a year after he took over.

Myspace was finally purchased by Specific Media for $35 million -- $65 million less than News Corp's asking price, and over $500 million less than News Corp had paid. On Wednesday, Myspace laid off over half of its remaining 450 employees.

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