MySpace threatens Google, faces challenges

The social networking site MySpace didn't exist three years ago, yet today it is one of the world's most popular, embraced mostly by teenagers and young adults who find it irresistible.

In the US, it ranks second only to Yahoo in page views, and drew almost 5 percent of all Web site visits in March, ahead even of mighty Google, which drew little over 4 percent, according to Hitwise.

It currently has over 73 million registered users worldwide, and adds about 250,000 new ones every day, according to a MySpace spokesman.

Users set up personal profile pages, where they can post photos, keep a blog journal, link to friends' profiles and see messages left by others. Teens seem to use their profile pages mostly to post notes to their friends and classmates, commenting on parties they went to or things that happened at school.

It has unexpectedly become the preferred Web starting point, snatching that title from Google in the same way Google took it from Yahoo, says Bill Tancer, Hitwise's general research manager.

"Although it's not a search engine, it's the biggest threat to Google today because it's taking over as the place you go to first on the Internet," Tancer says.

And all of this from a site whose success can't be attributed to technical or conceptual innovations.

In fact, the look of many MySpace user pages is rustic in terms of Web design, and the site lacks key Web 2.0 features, like the ability for users to tag content and for developers to build applications, or "mashups", on its platform. "It's barely Web 1.5," says Allen Weiner, a Gartner analyst.

Conventional wisdom indicates its success should have been attained by larger and more experienced competitors like Microsoft's MSN unit, Google, Yahoo or America Online, or established social networking players like Friendster.

And yet, MySpace is on top. Why?

First, MySpace was among the first social networking sites to also adopt other hot services, such as blogging, multimedia content streaming, photo sharing and communication tools like e-mail and instant messaging.

"They hit on the magic combination of all those things," says David Card, a Jupiter Research analyst.

Another master stroke was catering to teenagers and young adults, an audience then grossly underserved by social networking sites. With its heavy emphasis on music and entertainment in general -- over 1 million bands have promoted their music there -- the site became the preferred vehicle for youngsters to interact with friends and express themselves via easy-to-make personal profile pages.

"It's not an adult site that has been repurposed. They did a nice job of designing it for [teens and young adults] and they built up a strong advocacy among them early," says analyst Rob Enderle from Enderle Group.

"[Teens and young adults] who spent all their time instant messaging on AOL went to MySpace, where they could do something AOL could never figure out," Weiner says.

Still, not all is perfect in the kingdom of MySpace. It faces significant challenges which observers say could lead to its downfall.

The primary one: a concern that it has become a magnet for pedophiles. Several incidents have been documented by law enforcement authorities in which underage victims met predators on MySpace.

"The biggest threat right now to MySpace isn't competitors. It's the predators," Enderle says. "I don't think MySpace fully realizes how big a threat this is to its very existence."

Some, like Enderle, believe MySpace should become more proactive in its policing, using data analysis technology to discover if known sex offenders are using the site. Others have suggested raising the minimum age from 14 to 16 and being more stringent in verifying users' ages.

Others say that monitoring a site that is this large and growing this quickly is a monumental task, and that MySpace must be careful that its security efforts don't choke the interaction that users seek.

"MySpace has a near impossible challenge," says Weiner, about the need to provide security without discouraging social networking. "I think they're doing a pretty good job."

MySpace says it is heavily focused on security and points to, among other things, its appointment of its first-ever chief security officer in April of this year and its ongoing close cooperation with law enforcement agencies at all levels.

It allows users to restrict access to their pages and scans every single one of the about 2 million images users host with it every day, scratching those that violate its policies, which include no nudity.

"MySpace operates a comprehensive series of safety guidelines and solutions, which we believe represent the best practices in our industry," the company said in an e-mail statement.

Another major challenge for MySpace is living up to the lofty expectations of its parent company: global media conglomerate News last year paid over half a billion dollars for it and other Web sites owned by Intermix Media.

News Corp's Chairman and Chief Executive Officer, the legendary media tycoon Rupert Murdoch, has made MySpace the cornerstone of his company's Internet strategy.

Yet, consensus is that, for all its traffic and usage, MySpace doesn't generate nearly as much revenue as it should. News Corp doesn't disclose MySpace financial figures, but Jupiter's Card estimates revenue is well below US$200 million per year.

MySpace, which is free to users, makes money from advertising. But advertisers often shy away from Web sites like it that are controversial and where the content is generated by users and largely unregulated. "The advertisers you end up getting may not always be the ones you're looking for," Weiner says.

Moreover, MySpace isn't properly targeting the ads it does have, considering that it knows so much about its members, who share all sorts of personal information on their profile pages.

"Their targeting capability isn't any good yet. They need to build or rent that from somebody," Card says.

Then there is the danger that News Corp will clash with MySpace's management by proposing changes and additions, or by trying to use it too aggressively to promote other News Corp units.

"Typically, large-company executives aren't going to be the most connected to kids and it's easy for them to either over-react to a threat or under-respond to a market change," Enderle says.

Another challenge MySpace faces is the need to scale up its technology platform to sustain its growing user base and the bandwidth-heavy activities of its members.

Finally, as its members age, MySpace must decide whether it's going to try to adapt to their changing tastes and lifestyles or whether it's going to seek new crops of younger members.

"I'm a big fan. I don't think they're a flash in the pan. But it's going to be challenging," Card says.

(Sources: MySpace, Hitwise)