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News Corp considers MySpace sale, what happened?

After slashing 47% of its staff earlier this week, News Corp is considering selling the struggling MySpace, among other strategic options, Bloomberg reports. MySpace relaunched as an entertainment hub in October, and a month later, News Corp said MySpace’s financial losses “are not acceptable or sustainable,” setting July of this year as a deadline for profitability.

It’s amazing to remember back in 2005 that MySpace was on top, purchased by News Corp for $580 million. Many called it a bold, smart move by a media company. Forbes said it “looks like the purchase of the century.” So what happened? How did Facebook all but replace MySpace, and did the culture of a large media company play a role?

One of the best explanations about Facebook’s surge — and the subsequent MySpace decline — was the launch of Facebook Connect in 2008 with partners like Digg and WordPress. Soon after Connect was made widely available, Facebook’s share of the market surged as developers integrated Facebook into their sites. Interestingly, MySpace launched a similar product a few weeks before, “Data Availability,” but it never attracted big partners or widespread development interest.

“Facebook moved from being a College forum site to a full scale lifestyle platform,” wrote Dana Oshiro in ReadWriteWeb. “Whereas MySpace is still a website, Facebook has become an entire eco-system.” When MySpace relaunched in October, it included Facebook Connect.

But if you ask me, MySpace’s slide stems from a lack of aggressive product development. After the acquisition, there was a key stretch in 2006 and early 2007 where MySpace appeared to be focused more on international expansion and less on improving the user experience. The site looked messy and chaotic, while Facebook looked clean (and perhaps to many, too sterile.) But beyond design, by my estimation, MySpace went over a year without any new features of note. Finally in summer of 2007, MySpace rolled out MySpace TV, a video hub in a move to compete with YouTube. A new home page finally debuted in fall, which many said was in direct response to Facebook. And in late 2007, it announced a self-serve ad platform — the same time as Facebook.

In social networks, momentum matters. That year and half or so was a critical time to continue to lead the way with new user-focused products that captured buzz and kept its members engaged. Instead, MySpace slipped from leading to competing. Then simply, reacting to everyone else.

It’s hard to say whether the lack of product development stemmed from News Corp’s hesitancy to invest in the user — compared to expanding the business — or just poor product strategy decisions. For example, was the focus on MySpace TV just a big media’s reaction to YouTube, or a thoughtful investment in the MySpace user experience? That’s for someone else to write. Your thoughts?

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