A lot more to play for

The major social networking sites are suffering a slowdown in user numbers, with niche sites taking up the slack. But MySpace’s strong link to music may be enough to keep it on top, says Rufus Jay

MySpace, the social networking phenomenon whose popularity is under increasing threat from me-too rivals, is understood to have become embroiled in a tug-of-war battle between the Net’s biggest companies.

Owner News Corporation is considering offloading the network to Yahoo! in a trade-off deal to thwart Microsoft, itself in pursuit of a tie-up with Yahoo!, to give it much-needed armoury in the fight against Google.

Negotiations are understood to have taken place between Rupert Murdoch-controlled News Corp and Yahoo! over a possible merger of its Fox Interactive division and the US internet company. Under the deal, Yahoo! would take MySpace, while News Corp would get 20% of Yahoo!.

It seems telling that one of the world’s leading entrepreneurs would mull offloading MySpace, which despite remaining the biggest global social networking site is experiencing tail-off in key markets. Some are suggesting that Murdoch, who paid $580m (£295m) for MySpace in July 2005, considers now a good time to exit.

According to Tim Johnson, chief analyst at Point Topic, News Corp needs a strategic internet position. “This is an opportunity, it’s a big trading chip to use to get a dominant stake in Yahoo!,” he says.

MySpace grew to 77.4 million subscribers worldwide in just four years from launch, according to Nielsen Online figures, although growth seems to be plateauing. In January the number of UK unique visitors to the site dropped 9% year on year in to 5 million. Meanwhile, rival Facebook witnessed its first monthly dip in UK users since July 2006, down 5% month on month to 8.5 million. Elsewhere, Bebo’s number of UK unique visitors increased 53% year on year to 4.1 million in January, the third highest amount of UK visitors during the month, building its success on the back of content including websoap Kate Modern.

Observers point out that growth for the larger social networks has hit a natural slowdown after their meteoric rise. “It was inevitable; it had to happen at some time as social networking sites could not maintain that level of growth,” says Alex Burmaster, European internet analyst at Nielsen Online. “We have reached that drop-off point. The growth will now be seen more at more niche social networks.”

Point Topic’s Johnson agrees, saying the market at the prime end is saturated and that interest in big social networking sites has peaked because are people are now bored with the concept. He predicts that people will use social networking “much less or not at all.”

But Henry Ellis at Tamar disagrees. He thinks the slowdown is not down to boredom, but “a seasonal change”. “There is a lull as people are away and they aren’t checking their profiles as much,” he explains, and adds he is not convinced niche sites will steal market share. “Unless your friends go to those sites it won’t change for the big ones.” Ellis says niche sites will grow, but they will have problems attracting advertisers as they “cannot provide the same level of reach.”

Despite the slowdown, MySpace has come a long way from its official 2004 launch. The first MySpace users were musicians and club owners asked to join by the creators and set up profiles to which they could add friends. Its rapid growth started to attract interest, and in July 2005 parent company Intermix was bought by News Corp.

MySpace’s growth over four years has been fuelled by word of mouth and a viral-like uptake of the service. Oliver Gaymond, consultant at branding agency Value Engineers, says such an approach is common in this market, but adds: “MySpace differed from Facebook in that it expanded from a youth audience. Facebook went from Harvard students, then to other universities and then younger people heard about it.”

Gaymond says its strength lies in its strong music focus, which in turn gives it a clearer brand. “You have this mix of local and national bands on there and it pulls people together.” He adds that MySpace also encourages customisation of pages and self expression, which “ties in nicely with music”. No surprise, then, that the service is understood to be seeking record company partners to create an ad-supported music service that would allow consumers to listen to music free on their computers.

For News Corp, the attraction of owning MySpace lay in the “great opportunity to contact the masses”. “That is what attracted it – and the advertising opportunities,” adds Ellis.

Fox quickly began expansion and roll-out plans, launching a UK specific version in June 2006 in an attempt to attract the UK music scene. MySpace Comedy launched a month later.

Some have accused MySpace of copying successful elements of its rivals to stay on top. Indeed, in February it opened its developer platform site, enabling users to develop applications in a move similar to Facebook’s. Johnson says that differentiating itself is what will keep MySpace ahead, although Ellis warns MySpace must play to its core music and comedy audience or risk losing share. However, he concedes, News Corp cannot be “content with the music and comedy market: it has to keep pace.”

Observers say MySpace is also facing problems due to, ironically, one of its strengths – openness. According to Ellis, MySpace suffers from people setting up fake profiles, making friend requests and then spamming those users with advertising. “MySpace has become too spammy,” he says. “That is why people have left.” Johnson believes that rival Facebook does better at deterring and removing those spammers.

MySpace also lacks uniformity, according to Trenton Moss, director of usability consultancy Webcredible. “There is too much unrestricted access to profiles and too much freedom to design pages,” he says. “You have to re-orient yourself on each page and some look awful.” Yet he fears it could be too late for the service to do that now – it risks alienating the existing audience.

MySpace may have captured a generation of users in just a short time but it faces numerous challenges in order to stay ahead. Fast-evolving technologies, changing online behaviour as well as a demanding and fickle user base all present potential problems, while its substantial size and relative lack of control over the site should provide impetus to the chasing pack.

Timeline: MySpace 

January 2004 MySpace officially launches 

July 2005 News Corporation acquires MySpace 

June 2006 News Corp launches MySpace UK 

June 2007 MySpace TV launches new video platform 

February 2008 A developer platform site opens for users

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