MySpace is looking to do an about-face.
The once-red-hot social networking site acquired three years ago by septuagenarian mogul Rupert Murdoch, which landed him on the cover of Wired magazine and won News Corp. praise for embracing the Internet ahead of its old-media rivals, has cooled considerably.
New statistics released this week show MySpace has been surpassed by rival Facebook in the U.S. market, where it once dominated, and ad revenue for the site is projected to decline.
Signaling the depth of its problems, MySpace on Tuesday said it was laying off 420 people -- nearly one out of every three employees -- as part of an aggressive restructuring that seeks to make the company smaller and more agile. The action follows a management shake-up in April, in which MySpace founder Chris DeWolfe was replaced as chief executive by Facebook's former chief operating officer, Owen Van Natta.
"Simply put, our staffing levels were bloated and hindered our ability to be an efficient and nimble team-oriented company," Van Natta said in a statement. "I understand that these changes are painful for many. They are also necessary for the long-term health and culture of MySpace."
Van Natta's comments underscore just how troubled Murdoch's big Internet gamble has become in the rapidly changing world of social media. Highly touted initiatives, such as MySpace Music, failed to live up to expectations, even as the site's developers constantly play catch-up to the technological innovations of others.
"MySpace ended up not being the leader that it wanted to be in the social-networking realm, on the tech front, on the ad front -- and now on the usage front," said Debra Aho Williamson, an analyst with researcher eMarketer.
The perceived missteps are numerous. Some observers say it clung too long to a "portal strategy," in which it sought to amass an audience around entertainment content. By contrast, Facebook maintained its focus on features that enhance the social-networking experience, such as the "News Feed" that matches the immediacy of Twitter's staccato updates.
"The speed with which a company like Facebook is able to innovate and keep things fresh is the key to survival in this space," said Charlene Li, founder of Altimeter Group, a research firm specializing in social networking. "There are new things like Twitter that come along. What does Facebook do? It does Twitter . . . and it does it better."
