With MySpace CEO out, it's time to reinvent the company

With Facebook eclipsing the social networking pioneer, analysts say it's time for change

With MySpace CEO Chris DeWolfe stepping down, analysts say it's the perfect time for the social networking pioneer to reinvent itself and try to regain some momentum against rival Facebook Inc.

News Corp., which bought the social networking site in 2005, announced late on Wednesday that co-founder DeWolfe, by "mutual agreement", will not renew his contract and will be stepping down as CEO in the "near future." He will continue to serve on the board of MySpace China and will be a strategic advisor to the company, News Corp. said.

MySpace has been on the slide in recent years, letting Facebook significantly eclipse it in terms of market and mindshare. Three months ago, online researcher ComScore Inc. reported that Myspace, the pioneer of the social networking phenomenon, had been overshadowed as Facebook recorded almost double the number of global visitors in December than longtime leader MySpace.com. Five-year-old Facebook, once thought of as the up-and-coming social network, recorded its 200 millionth user earlier this month and had laid claim as the top social network for the burgeoning over-35 crowd.

In February, Facebook's audience of people over the ripe old age of 35 increased by 23% compared to a year-earlier, according to a report released today by Hitwise Pty., which measures online traffic. While Facebook was first created to serve college students, the network over the past year or so has broadly expanded its audience.

At the same time, though, Hitwise reported that MySpace has been unable to expand its base beyond teenagers. In fact, the number of MySpace users over the age of 35 dropped 2% from February 2008 to the same month this year, Hitwise noted.

"It is the classic sports metaphor; when the team does not perform, the manager is fired," said Ezra Gottheil, an analyst at Technology Business Research, Inc. "It is not that MySpace did anything wrong, but its initial positioning prevented it from moving into the somewhat older, notionally more mature Facebook demographic. What is more, Facebook is the flavor of the year. It has momentum."

Dan Olds, principle analyst at the Gabriel Consulting Group, said there's been some chafing between the Myspace founders and their new News Corp. overlords. But this change, he added, could be what MySpace needs to reinvigorate itself and gain some much-needed momentum.

"It didn't help that Facebook has moved quickly from laggard to leader in the social networking race to overtake MySpace," said Olds. "This really shouldn't be a surprise to anyone. The founders' contracts were due to expire later this year anyway, and seemed clear that they were not going to be renewed. So it probably makes it easier on everyone to make the transition to new management sooner rather than later. This will make it easier for the company to shake things up and hopefully regain their mojo... This gives them a chance to change things around and get out their rut. Kind of like Yahoo bringing in new blood with Carol Bartz."

Facebook has had some success in recent years, analysts do note.

For example, Caroline Dangson, social media research analyst at IDC, pointed out that MySpace generated nearly four times the advertising revenue that Facebook did last year. "Of course, a big part of the revenue was from guaranteed payments from Google which has run search and contextual ads on MySpace since 2006," she added. "The MySpace/Google deal expires in eight months, which has to be adding even more pressure to the situation."

Dangson also noted that the change in command at MySpace signals a move to change the company's strategy and culture.

"Any major shake up at a company is always opportunity to realign and reinvent," she said. "It also means time spent realigning and reinventing -- a distraction from external initiatives to gain market share from Facebook."

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