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Facebook Takes Fight to MySpace

Fending off Yahoo!'s bid has made sense for the hot Web property.

Now we know why

Facebook

refused to put itself up for sale.

You'll recall last September when word spread that

Yahoo!

(YHOO)

wanted to pay up to $1 billion for Facebook, which it saw as its best chance to

leapfrog into a leader in social networking after

News Corp.

(NWS) - Get News Corporation Class B Report

bought MySpace for $580 million.

(Later, a spurious rumor emerged that

Google

(GOOG) - Get Alphabet Inc. Class C Report

had bid $2.3 billion for Facebook.)

Yahoo! would surely have forced Facebook to mate with 360°, Yahoo!'s homegrown social network, and subject it to all sorts of surgery to graft on other Yahoo! properties like Mail and Answers and Flickr.

It would have been great, if costly, for Yahoo! -- 10 million members, most of them in college, imported overnight.

Facebook said no, as it had done in response to other nine-figure bids. Many believed it wanted to remain true to its gated-community spirit. Others thought it had passed on its best chance to cash out. MySpace was still ruling the social-network realm, growing in membership and page views faster than Facebook.

Eight months later, we're starting to see what Facebook had up its sleeve. Last week, it unveiled a new platform for its site -- and it's rich with new potential. It has quietly been building a better MySpace, one focusing its strengths on MySpace's weaknesses.

MySpace succeeded in part because of its early decision to offer members as many features as it could think of: photos, blogs, music, and add-on "widgets." It worked because people liked the freedom to experiment with how they'd express who they are online. But it only worked for so long.

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Most MySpace users customized their page -- and customized it and customized it, until it looked like some sort of monstrous crazy quilt whose chaotic garishness drove away everyone except the spammers, trolls and people so desperate to make friends on MySpace that they would build their profiles on wholesale lies.

Compete.com, a research firm tracking online activity, noted recently that Facebook's growth has started to pick up while MySpace's has slowed. Compete looked at

what it calls attention -- time users spent on a site as a percentage of all their online time -- and found that it grew 23% in April for Facebook, vs. 1% for MySpace.

Anecdotal evidence backs up those numbers. Writing about a recently gathered panel of high school students from Silicon Valley, GigaOm writer Liz Gannes noted they had a strong preference for Facebook as their social network of choice. In the comments of her post, someone who described himself as a high school junior in said this:

"The fact that MySpace is so open in what people can put in their profile means that some profiles are loaded with bandwidth-sucking content -- content that is poorly laid out and often useless. Facebook is clean, streamlined, easy to use, ad-free and always running. ... MySpace was a good 'gateway drug' to social sites, but Facebook is the drug of choice."

Facebook's membership has grown to 24 million from the 10 million last September, when Yahoo! was courting it and just after it opened registration up to anyone (and not just college or high school students). It claims to be bringing aboard 150,000 new members a day.

That growth has largely come as Facebook hewed to a minimalist elegance of its interface and kept its brand off the mainstream radar --two big pluses for alienated MySpace users.

Now Facebook is radically scaling up the social-network model into what it calls an online platform -- the way that a PC's operating software is a platform -- hosting social applications created by select partners. These partnerships will give Facebook access to features that MySpace will take months to create on its own.

Facebook has already signed up 65 partners, from

Amazon.com

(AMZN) - Get Amazon.com, Inc. Report

,

Microsoft

(MSFT) - Get Microsoft Corporation (MSFT) Report

, and

Blue Nile

(NILE)

to Obama for America.

Here's the kicker: Facebook is letting them keep all the revenue from ads served through their applications, provided the users stay on Facebook's site. No cut for Facebook, at least for now.

It's still too early to tell just where this new platform strategy will take Facebook. At the least, it's likely to propel it closer to MySpace's heels. MySpace feels like AOL in 1999 -- a bloated mishmash of features capable of drawing in new users and then pushing them on to more evolved alternatives.

In that case, the appetite of Internet and media giants for buying Facebook will only grow stronger. But if it's left independent for a few years, Facebook might just grow into one such giant itself, in which case it will be the one looking to buy new companies.