How MySpace Conquered the Continent

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Needless to say, MySpace's rivals aren't sitting still. Bebo, which started in 2004, is still ranked by researcher Hitwise as the largest social networking site in Britain in terms of monthly visits, though MySpace has more users. And despite the success of MySpace over the last year, both Bebo and Facebook are currently gaining ground in Britain. At today's growth rates, says analyst Alex Burmaster of Nielsen//NetRatings, they could catch MySpace by September of this year.

Opening Up to Outside Programmers

In part that's due to their different strategies. Until recently, membership in both Bebo and Facebook was by invitation only, which helped to create stronger communities and inspire more loyalty from users (see BusinessWeek.com, 07/02/07, "MySpace, Facebook: A Tale of Two Cultures"). The self-reinforcing nature of established online communities also works against MySpace. Says Louise Gething, a 22-year-old recent college graduate from Scotland, and Facebook member: "I don't see the point of joining MySpace now because all of my friends are already on Facebook."

Facebook also has recently taken a bold step to open its site to outside programmers, who can now add chunks of software or bits of other Web sites onto Facebook (see BusinessWeek.com, 05/24/07, "Facebook Aims to Socialize All Online Services"). Facebook hopes this open source approach will give it an edge over MySpace, and pundits are optimistic. "The key to success is to become an open platform," says Andy Mullholland, chief technology officer in the London office of infotech consultancy Capgemini. "You just have to look at the success of Microsoft (MSFT) and Google (GOOG) to see the potential."

Now, How to Make Money?

Now the question is whether any of these sites can start to generate profits. Though social networks have seen a rapid growth in Europe, the jury is still out on how they will make money. Many analysts think the most likely source is via advertising. "There's a real opportunity for brands and retailers to look at different ways of engaging with these online communities," says Heather Hopkins, research vice-president for Hitwise.

Hopkins argues most advertisers haven't grasped the opportunity yet, but the picture is starting to change. News Corp. Chief Executive Officer Rupert Murdoch said in February that worldwide advertising sales for MySpace had reached $25 million per month, up 30% from the previous quarter. And researcher eMarketer predicts advertising spending on social networks will soar from $450 million last year to $4.3 billion in 2011.

With its growing arsenal of local-language sites, MySpace looks positioned to ride that curve. Facebook, Bebo, and others are fighting to stay in the game, but for now, MySpace is the social networking site to beat in Europe.

Scott is a reporter in BusinessWeek's London bureau.