New York:
As Facebook was negotiating a half-billion-dollar investment from Goldman Sachs recently, MySpace, once the dominant Web site for social networking, was preparing to fire nearly half its staff.
The layoffs, which cut nearly 500 employees from a payroll of close to 1,100, were announced on Tuesday. The downsizing is the most draconian yet for the beleaguered company, and could be a precursor to a sale of the site by the News Corporation, which bought MySpace in 2005 for $580 million after a bidding war with Viacom.
On one level, the decline of MySpace again shows the fragility of social media where fickle consumers and changing tastes can make sensations out of services like Tribe and Friendster that quickly fade from public imagination. According to comScore, MySpace reported 54.4 million users at the end of November, a loss of more than nine million from the previous year.
"MySpace was like a big party, and then the party moved on," said Michael J. Wolf, the former president of Viacom's MTV Networks and managing partner at media consulting firm Activate. "Facebook has become much more of a utility and communications vehicle."
More broadly, the decline of MySpace is a tale with echoes of the ill-fated pact AOL made with Time Warner: a highflying Internet venture caught in a culture clash precipitated by joining a big media conglomerate. Then a competitor arrives on the scene with better technology.
Now the News Corporation is considering selling the site entirely, putting the capstone on the legacy of a deal that never quite worked out.
Even Tila Tequila, the model and rapper who achieved fame by building an audience on MySpace, has switched allegiances. In 2006, Time magazine called her the queen of MySpace, but these days she prefers Facebook.
"I just lost my passion for MySpace," she said in an interview, adding that she does not even remember her MySpace password, even though her page still lists 3.7 million fans. "I haven't logged on because it's not simple anymore."
MySpace began life as part of the News Corporation with the same sort of hoopla that now surrounds Facebook. Rupert Murdoch, the News Corporation's chairman, was immediately hailed as an Internet visionary. When Sumner M. Redstone, the controlling shareholder of Viacom, lost out to Mr. Murdoch, he called it a "humiliating experience" in an interview with Charlie Rose, and fired Tom Freston, the chief executive of Viacom, for failing to acquire the site.
Mr. Murdoch was an early champion of the site and its founders, Chris DeWolfe and Tom Anderson. He would have them to his ranch in Carmel, Calif., for long chats about the future of media, and often intervened personally to help them navigate the News Corporation's hierarchy so decisions could be made quicker, according to a former executive who demanded anonymity so he could maintain his business relationships.
In 2007, when Mr. Murdoch set his sights on Dow Jones and its prize, The Wall Street Journal, his attention was diverted from what had been his obsession, nurturing MySpace.
The calls to Mr. DeWolfe and Mr. Anderson for impromptu beers at a bar near the News Corporation's Midtown Manhattan headquarters became less frequent, as did Mr. Murdoch's help in cutting through the bureaucracy.
Another early sign of the culture clash was the News Corporation's decision -- which executives publicly complained about at the time -- to move MySpace's offices from Santa Monica, where employees worked in a loft space and had access to countless restaurants and coffee shops, to a building in Beverly Hills that was originally intended to be a medical facility. There were many fewer restaurants nearby, and employees began leaving work early to eat, and not returning until the next day.
Users, meanwhile, have been fleeing by the millions. MySpace's aesthetic came to be seen as cluttered and unwieldy, like a locker door, while Facebook came along with a simple, Google-like interface.
Like many Americans, Erin Polley, a 29-year-old who works for a nonprofit organization in Indianapolis, received her social networking baptism years ago on MySpace.
And like many Americans, she has moved on.
"To me, it was kind of a precursor to how Facebook is now, where everyone is on it, and it's almost a necessity," said Ms. Polley, who added that she had not logged on to MySpace in years because it became "amateurish" and "boorish" and too focused on celebrities and music.
"Every time I logged on it was just messages from bands I barely heard of," she said. "Facebook allows you to actually connect with real people, rather than bands or celebrities."
The imperatives of making money, rather than focusing on technology and expanding new users, is what perhaps sealed MySpace's fate.
"The paradox in business, especially at a public company, is, 'When do you focus on growth, and when do you focus on money?' " said Mr. DeWolfe. "We focused on money and Facebook focused on growing the user base and user experience."
Early on, the News Corporation announced an ambitious goal of generating $1 billion in revenue, which it failed to meet. A $900 million advertising deal with Google ensured that the News Corporation made its money back from the acquisition, but more recently MySpace's performance has been a drag on the earnings of the News Corporation.
In the most recent quarter, the division that houses MySpace reported a $156 million operating loss.
"The current losses are not acceptable or sustainable," said Chase Carey, the News Corporation's president, in a conference call with investors in November.
Facebook also attracted more affluent users who are more sought by advertisers. The only demographic group that showed gains in MySpace use last year were Americans who earned less than $25,000 a year, according to comScore.
"MySpace was clearly the dominant player, but unfortunately never innovated and got complacent," said Jeremiah Owyang, a technology blogger and analyst at Altimeter Group in San Mateo, California.
The urgency to make money and meet ambitious revenue goals set by the News Corporation meant the company was forced to accept an ever-increasing number of advertisements of dubious quality -- like pop-up weight-loss ads -- that turned off consumers.
Facebook and its co-founder, Mark Zuckerberg, have taken the opposite tack. By refusing billions to sell out to a larger company, Mr. Zuckerberg has focused on expanding the user base and improving the site, as well as attracting capital -- like the infusion from Goldman Sachs -- while maintaining near total control and independence.
"Could MySpace have become what Facebook is, a utility used by hundreds of millions of people worldwide?" said David Kirkpatrick, a technology writer and author of "The Facebook Effect." "It could not have, had it not overcome its heritage of Times Square tawdriness."
While MySpace and its joint venture with the major music companies, MySpace Music, remains a showcase for bands and musicians, even that niche is under attack.
Andy Suzuki, of the acoustic singer-songwriter act Andy Suzuki and the Method, founded his band in 2006 while a student at Brown, and quickly set up a MySpace page.
"It never really did much for us," said Mr. Suzuki, 24, who said he was about to delete his MySpace page and has moved the band to the start-up music site Bandcamp. "It was a place where people could go and listen to our music for free. But as we got more legit, how cumbersome MySpace is became evident."
After several tries to revitalize MySpace -- rounds of management changes, layoffs, a shift in direction from social networking to entertainment and a redesign last fall -- the company is no longer considered a competitor to Facebook. Still, MySpace's trajectory could prove instructive for Facebook as it negotiates its rapid growth.
"These Internet businesses tend to have a cycle," said Mr. Wolf, the former MTV president who once sought to buy Facebook for Viacom. "There's a lot of people who wonder if the same thing will happen to Facebook."