Facebook grabs fed-up MySpace users
11:41 AM CDT on Thursday, October 4, 2007http://www.dallasnews.com/sharedcontent/dws/bus/stories/100507dnbusfacebook.28748a.html
After Web cam girls and spammers bombarded Sean Conaty with buddy requests on MySpace, he switched to Facebook to connect with his real-life friends.
"Facebook seems a lot cleaner and nicer," said Conaty, 25, a Web designer at AdBrite Inc. in San Francisco. He cut back his social networking on MySpace to once a week and now logs onto Facebook daily to read comments and view photos posted by friends.
As technology companies search for acquisitions in the online world, Facebook may be boosting its value by narrowing the gap with News Corp.'s MySpace, its primary rival. Facebook attracted 69.3 million users in August, 33 percent more than in June. Visitors to MySpace declined 7.4 percent to 105.7 million, according to researcher ComScore Inc.
Facebook won users because the site may be more private. It is designed to encourage people to use true identities, whereas MySpace has more anonymity and has been forced to confront reports of sexual predators on its site. Facebook also started a $10 million fund to encourage software developers to create customized games and videos.
"Facebook has surpassed MySpace in terms of functionality," said Michael Morris, an analyst at UBS AG in New York. He has a "buy" on News Corp. shares and doesn't own any. "For anyone who's a MySpace user, who dislikes the chaos of it, Facebook is a welcome change."
Mark Zuckerberg, the 23-year-old Facebook founder who turned down a $1 billion buyout offer last year from Yahoo! Inc., may get an investment from Microsoft Corp. that would value the company at $10 billion, the Wall Street Journal reported in September, citing unidentified people familiar with the matter. Microsoft Chief Executive Officer Steve Ballmer played down the report this week, calling the idea "idle speculation."
The reported talks may indicate a scramble to win advertisers moving toward social-networking Web sites where they can target users based on their ages and hobbies. Facebook, in Palo Alto, California, is fighting with MySpace for three- quarters of $900 million of social-network ad revenue in the U.S. this year, more than double the previous year, according to New York researcher EMarketer Inc.
That market will grow faster than the overall online ad market every year through 2011, when ads on social-networking sites will reach $2.5 billion, EMarketer estimates.
"Facebook is growing in traffic and MySpace continues to be a dominant platform," said Gus Tai, a partner at venture capital firm Trinity Ventures Ltd. in Menlo Park, California.
Facebook was the 14th most-popular U.S. Internet site in August, according to Reston, Virginia-based ComScore. Sites run by Fox Interactive Media, which includes MySpace, FoxSports.com and video game network IGN Entertainment, were fifth.
News Corp.'s Class A shares, up 3.6 percent this year, fell 22 cents, or 1 percent, to $22.26 yesterday in New York Stock Exchange composite trading.
"It's going to take more than a competitive site to kill it," Fox Interactive Chief Revenue Officer Michael Barrett said of MySpace in a September interview. "We're still growing and we see a big surge in user engagement."
The site, which New York-based News Corp. bought in 2005, is worth more than $11.6 billion, or 20 times its $580 million purchase price, Chief Executive Officer Rupert Murdoch said at a conference in September.
Two years later, Microsoft may buy as much as 5 percent of Facebook for up to $500 million, according to the Journal. Facebook declined to comment. Zuckerberg said at a conference last month that he's not looking to sell the company and has no immediate plans to sell shares to the public.
Facebook declined to make executives available for this story and said in an e-mailed statement it is looking for ways to enhance targeted ad products. It didn't provide details.
In May, Facebook began allowing independent software developers to offer their own programs, such as chess and poker games like Texas Hold 'Em, as well as videos and page decorations. More than 8,000 have registered with the company. The added programs helped attract users similar to Conaty, who plays Scrabble through the site.
Where Facebook emphasizes communication among friends, MySpace focuses on entertainment and self-expression. Users can personalize their pages, watch concerts and Web videos and post their own clips.
As both sites grew, privacy concerns followed. MySpace and Facebook are wrestling with investigations by attorneys general in states including Connecticut and North Carolina, following complaints that they aren't doing enough to keep sexual predators off their sites.
Originally restricted to college students, Facebook opened up to high school kids and adults, allowing the site to more than triple its worldwide customers in the past year.
Murdoch, whose site lists only first names or nicknames, said at the September conference, "If you wanted to stalk a young girl on Facebook, it would be very, very easy." Facebook users often post full names, phone numbers and addresses.
Facebook didn't respond to a request for comment. Spokeswoman Brandee Barker said in an e-mail response to a separate query last month that the company is "working on processes and technologies that will further improve safety and user control on the site."
MySpace says it has technology to identify registered sex offenders and removes their profiles. The company had kicked off about 7,000 registered sex offenders as of May and said it would honor requests to share information with state authorities.
Legal challenges aside, the companies are battling for users who are expecting more from social networks, said Charlene Li, an analyst at Cambridge, Massachusetts-based Forrester Research Inc.
"You're not going to split the time between Facebook and MySpace," Li said. "If a core part is sharing music, then it's MySpace. If it's doing other things like Texas Hold 'Em, Facebook may be a better fit."