News Corp (NWS) Can't Keep Its Advantage: Facebook Passes MySpace

The two largest online social networks are Facebook, which is a private company, and MySpace, which is owned by News Corp (NWS). MySpace has always been the larger property. Facebook was a distant second, but gaining.

The News Corp deal to pick up MySpace was always viewed as a brilliant move by Rupert Murdoch. He paid $580 million for the operation in mid-2005. Facebook was recently valued at $15 billion. so the Australian got a discount by moving into the market early.

Unfortunately for Mr. Murdoch, his front-runner status is gone. According to audience measurement firm comScore, in May the unique visitors to Facebook hit 123 million. MySpace had only 115 million uniques. The FT writes "Facebook, the fast-growing social network, has taken a significant lead over MySpace in visitor numbers for the first time, according to one popular measure of internet traffic."

Over the last year, Facebook’s visits have almost doubled. MySpace is only up 5%.

Does it matter? Probably not. Over at News Corp, MySpace has been missing its revenue targets. Murdoch hoped the operation would do $1 billion last year. It was off that by about 20%.

Social network sites will probably never do well financially. That is only a recent discovery, but it makes the news no less damaging. Visitors to these sites go to build profiles of themselves, mostly juvenile and overblown portraits. Their friends and complete strangers can go online and check all of this dreck. But, it has little value to advertisers. Organizing social network users into unique "buckets" is hard. At Google (GOOG), marketers can target users by search topic. At Yahoo! (YHOO) content areas are broken down by subject–finance, news, sports, jobs.

The number of people using social networks may continue to grow quickly, but they have little value to GM (GM), Procter & Gamble (PG), or IBM (IBM), because no one knows why Facebook users spend their time online trying to make themselves look better than they really are.

Douglas A. McIntyre