MySpace, Twitter Display Danger of Coolness

In many ways, social-networking sites live or die by their buzz. For a site to grow, it has to convince users that it's a place they want to be seen.

"The networks that succeed are the ones where your friends are," says Allen Stern, editor of CenterNetworks.com, which tracks developments in social networking, and founder of the business-card management service Cloud Contacts. "Media hype can be important, but what's more important is that you go where your contacts are. A site has to have that sticking power."

MySpace may have snagged News Corp.'s big bucks, but it wasn't sticky enough to fend off what became its biggest competitor: Facebook. That's because Facebook reinvented the nature of the network: While MySpace encouraged a come-one, come-all attitude, encouraging users to connect with people they didn't know, Facebook offered exclusivity.

MySpace's multicolored, chaotic pages reflected its free-for-all spirit. In contrast, Facebook offered a neatly organized format where information would only be shared with approved users. That suddenly started to look a lot more appealing than MySpace. After all, what's cooler: a party open to whoever shows up, or one with a guest list?

"Facebook is like AOL was when the Internet first started taking off," Stern says of America Online, which is owned by Time Warner(TWX Quote). "They keep everything tightly controlled."

Facebook's numbers are impressive. The company says it has 200 million active users, about half of whom log on to the site each day. (Whether that's translating into more profits is hard to answer, since it's a privately held company.) The fastest growing demographic is those 35 years and older. And that could be Facebook's ultimate downfall. As it attracts more users, it loses its cache. Once Grandma's on Facebook, how cool can it be?