Ronny Kerr's Social Sense


MySpace history: A brief walk down memory lane

How a little social network named Facebook sucked a stale website dry

Innovation series by Ronny Kerr
June 30, 2011
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So this is what it looks like to stop mattering:

I made the chart above by compiling statistics across a wide variety of sources, including the official Facebook timeline and archived media articles from the past seven years. The data available is wildly fragmented, so specific data points should each be taken as an approximation, though the overall trend is obviously accurate.

Here are the actual figures used, with data drawn from the final months of each year listed:

Year: Facebook / Myspace

  • 2004: one million / five million
  • 2005: 5.5 million / 27 million
  • 2006: 12 million / 100 million
  • 2007: 50 million / 100 million
  • 2008: 100 million / 115 million
  • 2009: 350 million / 125 million
  • 2010: 600 million / 95 million
  • 2011: 700 million / 63 million

Keep those user counts in mind as we walk through the timeline of Myspace valuations.

In July 2005, when Myspace's boundless growth made it seem unstoppapble, Rupert Murdoch's News Corp. purchased the social network for $580 million. It had destroyed its social networking predecessors, it was on the cusp of an explosion in user growth and the kids loved it. What could go wrong?

A whole lack of innovation, that's what. While little Facebook slowly iterated, continually improved the site's design and kept adding addicting connectivity features, Myspace remained stale. And staying stale for Myspace meant sticking with slow, clunky, overly customized pages that less and less people wanted to spend time visiting.

Even so, in October 2007, Myspace was still considered by analysts to be worth upwards of $65 billion, based on the same criteria that investors were using to value Facebook at $15 billion. That was probably the last time anybody ventured a value for Myspace that high. Over the next several years, active users dwindled slowly, page views dwindled slowly, and, as Facebook rocketed to the forefront, Myspace's valuation crumbled to the ground.

As recently as this past January, stock analyst Trefis estimated that because Myspace accounted for about two percent News Corp’s total stock value, that made it worth about $1 billion. And yet, as the site hemorrhaged users, it seemed very unlikely that anyone would be willing to pay even a third of that. Murdoch would have been happy with a tenth.

We all know the end of the story. News Corp. sold Myspace for $35 million this week, a mere fraction of the original transaction. Facebook, meanwhile, has most recently been valued by new shareholder GSV Capital at $70 billion, or 2,000 times the value of its former rival.

Are we going to see the same chart half a decade from today, with Google+ in blue and Facebook in red? It sounds insane, but with social networking sites, anything seems possible.

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