MySpace: A place for… what, again?

August 26, 2010: 3:32 PM ET

With declining ad sales, a stagnant user base, and a creaky interface, the once-mighty social network has a redesign on deck, but is it enough to save the site?

Visit the MySpace offices in the News Corp. complex in Beverly Hills, and you won't see a company in crisis. Underneath the company sign, a dry-erase board reads "A place for..." with scribbled Mad Lib-esque responses like, "Soy Milk Ecstasy" and "Trolling." Employees in baggy t-shirts and jeans make wisecracks while getting grub from the second-floor cafe. Elsewhere, four guys play a quick round of ping-pong in the atrium area. They're hooting and hollering as they swat the ball back-and-forth. One of them sports a black shirt covered with the slogan, "Your mom is on Facebook."

Everyone loves a comeback story: the rise, the fall, the unexpected reversal of fortune.  But despite the jovial atmosphere in its offices, MySpace is still neck-deep in the second act. And although it's trying mightily to complete the reversal, the odds are stacked against it.

At its peak in July 2006, MySpace was the most-visited Web site in the U.S., pulling in 4.5% of all traffic. The first crop of American teens to embrace the expanding community earned the nickname "Generation MySpace." Even more than Friendster, which it was based on, the social network founded by Chris DeWolfe and Tom Anderson in January 2004 blurred the lines between online social interaction and the real world. Users could search out one another online by common interests, like favorite band, and meet-up face-to-face.

"It presented a set of features that nobody else on the Internet had," recalls Forrester analyst Augie Ray. "At the time, Facebook was a closed network for college students, so I think people gravitated to MySpace so they could do easy sharing."

By 2005, MySpace had become so righteously hip, even Rupert Murdoch wanted in, and News Corp. (NWSA) scooped up MySpace's parent company Intermix Media for a cool $580 million. Murdoch had acquired the web's hottest property, and the sky seemed the limit. What he and MySpace didn't anticipate was just how ephemeral being on top can be.

How MySpace lost face

Once Facebook, with its more elegant user interface and more intuitive sharing features, realized its larger ambitions and expanded beyond being a hub for college students, it surpassed MySpace to become the largest social network in April 2008.

It also didn't help that MySpace lost sight of its mission, a truth even President Mike Jones will admit.

"MySpace expanded into areas it probably shouldn't have gone," he says. "I mean, yes, it had a photo uploading system. But I don't think it's about sharing baby photos. Yes, you could 'friend' anybody on there. But I don't think it's a place where you want to 'friend' your mom." In effect, Jones believes MySpace diluted the brand, widening the opportunity for Facebook to siphon users, which it has: MySpace now recognizes 120 million users worldwide, while Facebook claims more than four times that number.

In the years since, the company's top ranks have thinned out. Like an executive-level game of musical chairs, executive after executive has left for one reason or another. In April 2009, DeWolfe quit his CEO post, to be replaced by former Facebook COO Owen Van Natta, who laid off more than 400 workers before reportedly being fired himself several months later. Co-presidents Mike Jones and Jason Hirschhorn* stepped in this past February, but five months later, Hirschhorn resigned. Jones now runs MySpace solo. He won't comment on the departures, only to say that he's committed to the foundational work he and his predecessors laid out for the future.

And MySpace's only revenue source, advertising, is suffering, too. Analysts expect the social network's ad sales will drop from 32% of overall U.S. social network ad spending in 2009 to just 19% in 2010. Compare that to Facebook's rapidly increasing share: 36% in 2009 to 50% this year, and it's clear where things are headed.

MySpace's solution

Given MySpace's troubles, it's easy to compare it to Bebo, the overvalued social network acquired by AOL in 2005 for $850 million that reportedly sold five years later for less than $10 million.

Rumors circulated that Murdoch was considering selling MySpace to a private equity firm. While nothing more than speculation, that kind of talk can't be good for a company's rep.

No, if MySpace has any hope of growing and connecting with new users -- and that hope seems to be declining as quickly as its revenue stream -- it needs a reboot. A major one. One so radically different from the MySpace and well, Facebook, of today so as to be viewed by the malleable public, and even cynics, as a veritable brand rebirth, a must-have product.

"MySpace really needs a product reset," says Jones. "It needs a new visual skin, a new visual platform, that allows users to really discover these new products we're releasing. Until we do something like that, it's really hard to market."

This fall, MySpace will relaunch with a visual makeover and a new mobile product suite. Based on limited user previews, the interface will be cleaner and less cluttered with a wider activity feed, a new "MyStuff" module that will allow quick access to user photos, videos and music on the homepage, and a simplified recommendations box. Also expected: "Topics" pages that will group news, images, music and other media when users search for say, a band or an actor. Beyond that, the company remains mum on visual tweaks.

MySpace's proposed new home page design

Ray isn't convinced that putting a new skin on the same tried-and-true product will be enough. "I think it's certainly an improvement, and I think people who have seen it think it's an improvement," he says. "But if they're looking to draw people away from Facebook and new users to MySpace, the redesign isn't really going to contribute significantly to that."

Apparently just as important for the company is mobile, a phenomenon that News Corp. digital chief Jon Miller told Fortune at this year's Brainstorm Tech conference caught the company by surprise. Right now, MySpace has one mobile app, which replicates the MySpace desktop experience on mobile devices. A group of designers in the company's first-floor design studio are toiling away on a suite of mobile apps that will act as MySpace "lenses" and be rolled out every month through the rest of the year. Each one will focus on different elements of MySpace: presumably photos, music, and so on.

The first such app out of the gate is Romeo, essentially a Pandora for music videos.

Romeo allows users to choose one of 13 moods like "naughty," "aggressive," and "studying" and one of 15 music genres. Once selected, videos automatically play, and users can "like," "hate," "share," and "forward." Romeo adjusts the video playlist based on user choices; short ads play every 15 minutes or so. Initially available for the iPad and desktops, Jones promises such MySpace apps will eventually appear on the iPhone, Android handsets and Windows platforms. While it's certainly a fun app, it feels more like an added perk than a must-have product. Unlike the hugely-popular streaming music app, Pandora, which it resembles conceptually, it's hard to imagine mobile users draining smart phones for hours on end, watching random music videos.

MySpace's mobile Romeo app.

Unless MySpace has more groundbreaking products in the works – and at this point, we don't know that it does -- it might find itself continuing to tread water as a second-class citizen at best, and at worst, witnessing a further decline into oblivion. Indeed, MySpace just released a not-cheap looking video with a Steve Slater look alike parading around the offices spouting marketing copy and cringe-inducing jokes as the erstwhile JetBlue flight attendant meets the staff and redesigns his now-famous MySpace profile. The fact that Slater or any public figure had a MySpace profile, five years ago, would've been completely unremarkable. Now it's apparently so novel that the company thought a six-minute video parodying a user was a good use of the time and talents of its executives and marketing staff.

Slapping on a new visual skin and releasing niche, albeit fun, products won't likely fool a social media-savvy public who've long since left for greener online pastures.

*An earlier version of this story used an incorrect first name for former President Jason Hirschhorn.

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About This Author
JP Mangalindan
JP Mangalindan
Writer, Fortune

JP Mangalindan is a San Francisco-based writer at Fortune, covering Silicon Valley. Since joining in 2010, he has written on a wide array of topics, from the turnaround of eBay to the evolution of net neutrality. A graduate of Fordham University, Mangalindan has also written for GQ, Popular Science, and Entertainment Weekly.

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