MySpace was once the largest social network in the world, valued at over $12 billion at its peak with millions of active users. However, within a few short years it went from massive success to catastrophic failure. So what happened? Why did MySpace fail where its rival Facebook succeeded?
The Rise of MySpace
MySpace was founded in 2003 by Chris DeWolfe, Tom Anderson, and a team of programmers at eUniverse. They rapidly built up a userbase by utilizing eUniverse‘s mailing lists to spread awareness of MySpace.
By 2005, just two years after launch, MySpace had become the world‘s most popular social networking site with over 20 million monthly active users. Its rapid growth was unprecedented for an internet company at the time.
MySpace‘s meteoric growth made it the largest social network by 2005. (Source: History-Computer)
MySpace differentiated itself by targeting a young audience interested in music and pop culture. It became enormously popular with teenagers and young adults, especially those interested in emerging bands and the latest entertainment trends. Bands could create MySpace profiles to promote their music and directly engage with fans.
Massive Success and $12 Billion Valuation
Buoyed by its incredible growth, News Corporation purchased MySpace in 2005 for over $500 million. Just two years later in 2007, MySpace was valued at a staggering $12 billion. At its peak, it accounted for 75.9% of all US visits to social networking sites and appeared utterly unassailable.
MySpace generated enormous amounts of revenue through advertising, as it attracted 100 million global monthly users at its height. With teenagers and young adults spending hours per day on the site, advertisers eagerly paid top dollar to reach this lucrative demographic.
For a few brief years, MySpace enjoyed spectacular success and seemed poised to dominate social networking for the foreseeable future. But its fortunes would soon turn.
The Emergence of Facebook
When MySpace was flying high around 2007, an upstart competitor called Facebook began making inroads with a different audience. Originally launched in 2004 as a student directory for Harvard University students, Facebook began expanding to other colleges, then high schools, and eventually the general public.
Rather than music and entertainment, Facebook focused more on connecting friends, family, coworkers, and acquaintances. It emphasized real identities over pseudonyms, and took steps to ensure users were who they claimed to be.
Crucially, Facebook was willing to expand beyond its initial niche audience of college students. MySpace, on the other hand, remained firmly committed to targeting teenagers and young adults.
Spurned $75 Million Acquisition Offer
In 2006, MySpace and Facebook held talks over MySpace potentially acquiring Facebook. MySpace reportedly offered $75 million, but Facebook CEO Mark Zuckerberg turned down the offer as he saw greater long-term potential for his network.
At the time, MySpace dwarfed Facebook in size and revenue, so Zuckerberg‘s audacious refusal appeared foolish. However, it proved to be an extremely savvy decision in just a few short years.
Cracks Begin to Show
In 2008, Facebook overtook MySpace in terms of global website traffic. Facebook attracted more total visitors that year as the momentum decisively turned.
Behind the scenes, trouble had been brewing at MySpace for years due to mismanagement, strategic mistakes, and failure to innovate. These weaknesses enabled Facebook to rapidly gain ground despite MySpace‘s significant head start.
Site Redesign Disaster
In 2009, MySpace announced a major site redesign to try and modernize its look and feel. However, it failed catastrophically. The attempt to overhaul the site‘s design alienated existing users, while prospective users were not drawn in.
Traffic plummeted as infuriated users abandoned MySpace‘s increasingly unstable and buggy platform for alternatives. The redesign swiftly reversed all of MySpace‘s growth to date.
Failing to Innovate
As competition from Facebook heated up, MySpace rested on its laurels rather than rising to the challenge. It did not meaningfully improve features or services on its platform, still relying on outdated systems from years earlier when it seemingly had no rivals.
Facebook, in contrast, took the opposite approach. It constantly rolled out attention-grabbing new features and services aimed at boosting engagement. Users found Facebook‘s software faster, more intuitive, and versatile. Advertisers eager to use sophisticated targeting technology flocked to Facebook as well.
By 2010, Facebook‘s monthly active users exceeded 500 million, while MySpace languished under 60 million. Revenue and valuation followed a similar trajectory with Facebook accelerating upwards as MySpace collapsed.
The Decline of MySpace
The year 2011 marked a shocking fall from grace, as MySpace recorded just over 37 million monthly active users—a massive plunge from over 100 million users just two years earlier.
Advertising dollars dried up as neither users nor advertisers were interested any longer. Morale inside MySpace similarly plummeted as executives and employees recognized that failure was imminent.
In an act of desperation, News Corporation sold MySpace in 2011 for just $35 million—$545 million less than they had paid for it six years earlier. The fire sale price represented a crushing 99%+ decline from its $12 billion valuation in 2007.
The new owners attempted to reinvent MySpace as a music platform rather than social network. However, this failed to substantially revive its fortunes. It remains online as a minor niche site for upcoming bands and artists, albeit completely overshadowed by more popular alternatives like Facebook, YouTube and SoundCloud.
Reasons for Failure
So what ultimately caused the downfall of what had once been the world‘s hottest tech startup? There are a few key reasons why MySpace failed spectacularly:
1. Targeted a Limited Demographic
MySpace heavily focused on teenagers and young adults interested in pop culture and entertainment. While enormously successful initially, this restricted audience ultimately hindered long-term growth as people aged out of MySpace‘s core demographic.
Facebook instead chose to welcome users of all age groups and backgrounds. Their decision proved wise as more eclectic and diverse audiences fueled greater expansion.
2. Failed to Innovate
As competitor products like Facebook improved by leaps and bounds, MySpace stubbornly clung to the same product design and features that had succeeded years earlier. Their failure to meaningfully innovate left the platform looking stale and outdated.
3. Botched Site Redesign
The calamity that was MySpace‘s 2009 website redesign reversed all their prior growth and set flame to their existing userbase. It illustrated poor overall product direction and inability to understand what made the site successful in the first place.
4. Excess Ads Alienated Users
In 2006 MySpace had signed a massive $900 million 3-year advertising deal with Google that utterly plastered the site with ads. This infuriated users and eroded much of the core experience that had made MySpace appealing.
While the short-term payday was nice, it compromised long-term loyalty and retention as users fled the increasingly chaotic site bogged down by relentless advertising.
5. Leadership Instability and Infighting
Behind the scenes, turmoil amongst MySpace‘s leadership team severely damaged company culture. Constant power struggles and conflicting visions for the company‘s future severely hampered their ability to respond to competitive threats. Poor leadership was a major contributor to failure.
By failing to address any of these core issues adequately, MySpace unwittingly ceded control of the social media landscape to Facebook in the late 2000s. What had once seemed inconceivable given MySpace‘s utter dominance became cold hard reality just a few years later.
Why Facebook Won
In contrast to MySpace, Facebook made a series of smart strategic moves that ultimately allowed it to reign supreme. These include:
1. Broad Audience Appeal
By welcoming diverse users of all backgrounds and age groups, Facebook designed their platform to support long-term retention and reduced audience churn.
2. Continuous Feature Innovation
Facebook evolved aggressively with new features and updates that boosted engagement and lock-in. Platform stability issues that plagued MySpace were nowhere to be seen.
3. Leadership Consistency
Mark Zuckerberg maintained clear long-term vision and avoided the infighting that severely damaged MySpace‘s culture internally. Strong unified leadership enabled Facebook‘s ascendance.
4. Mobile-First Platform
Facebook invested early in mobile technology which later proved crucial as mobile usage exploded. MySpace utterly failed to build coherent mobile functionality allowing Facebook to pull far ahead here too.
By learning from MySpace‘s mistakes and forging their own path, Facebook ultimately won the titanic social media battle of the late 2000s. MySpace‘s utter dominance ended shockingly fast, serving as a cautionary tale to tech businesses about the importance of continued innovation and appealing to broad audiences. Just a few missteps proved catastrophic for MySpace.
MySpace Today
Today MySpace still exists but mainly as a platform for upcoming bands and artists rather than everyday social networking. Musicians can upload songs, videos, and promote their tours and merchandise. Given its former association with pop culture and entertainment, focusing specifically on music makes sense.
However, MySpace is utterly dwarfed by juggernauts like Spotify, YouTube, Facebook, and Instagram. It occupies a small niche rather than its early 2000s position as the top global site pulling in billions of ad revenues annually.
Few business blunders have been as prominent as the decline of MySpace. Nevertheless, it played a crucial role in proving the promise of social networking to early internet users around the world. It paved the way for subsequent platforms like Facebook to achieve even greater heights using the formula MySpace itself discovered.
In that sense, MySpace‘s legacy lives on today even as it resides in obscurity. The site showed the massive potential of interactive online networking amongst friends, family, colleagues and even strangers with shared interests. Modern social sites owe a substantial early debt to the brief but wildly successful phenomenon that was MySpace.
