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MAY 31, 2005
By Steve Rosenbush Why MySpace Is the Hot Place [Page 2 of 2] ON-SITE DEBUTS. Online social networks are also part communications tool, like e-mail or the phone. Julie Herendeen, vice-president for network products at Yahoo, says the company's research shows that most people aren't that interested in using social-networking sites to meet new people. Instead they want to keep in touch with people they already know. Either way, these sites have the potential to become the next major medium for advertisers. MySpace already is developing into a powerful way to reach 16- to 30-year-old consumers, one of the most sought-after and elusive demographic segments. The outfit has created ad campaigns for Target (TGT ) and Procter & Gamble. NBC's new comedy show, The Office, made its debut on MySpace. So did Showtime Network's (VIA ) Fat Actress. And Interscope Geffen A&M Records (V ) has launched new albums from Nine Inch Nails, Beck, and Queens of the Stone Age on the site. "They were the biggest debuts in each band's history," says Courtney Holt, director for new media at the record label. "We take MySpace very seriously." PERSONALITIES SHINE. So powerful is the site as a means to connect with fans that some musicians hope MySpace and sites like it could remake their industry. Record labels have been essential because they know how to market and promote their artists. But these days, why should bands bother with a label? They can post their tour dates on MySpace, put up music samples, and correspond via e-mail or message boards directly with their fans. "MySpace throws a wrench in all that -- and that makes it dangerous," says Corgan. That's one reason to think, despite the challenges MySpace faces, there's good reason to think it can survive -- and thrive. It's not clear that MySpace users will be swayed by Microsoft's vision of integrating e-mail and instant messaging platforms into a social-networking site. "I can see why some people would find that appealing, but it wouldn't matter that much to me," Carley says. MySpace has flourished because it has given members the tools to customize their Web sites. That has allowed its users' personalities to come through. Friendster, with its smiley-face logo, has focused on fostering safety and trust. MySpace has let its members do whatever they want. "The key to MySpace is that it's controlled by the user. Friendster is a much more controlled environment," says Joel Bartlett, an organizer for People for the Ethical Treatment of Animals. He says his group has a presence on MySpace, Friendster, and blogging platforms LiveJournal and Xanga. Its MySpace site has created a network of 13,000 people, while the other sites have attracted just 3,000 each. "ALL ABOUT ENERGY." Although it can't match Microsoft's cash, MySpace has access to capital and technology because it's over 50%-owned by Intermix, a publicly traded tech company. And if it needs to raise more cash to fund product development, it has the option of going public or selling to a larger company, such as Google (GOOG ), the only big portal that doesn't have a social-networking feature of its own. MySpace won't disclose its financial details, but analysts believe it's profitable. That's a crucial hurdle on the way toward a public offering. MySpace's future ultimately rides on intangibles that transcend technology and focus groups. "The world is all about energy. If you can generate energy, it will ultimately translate into money," Corgan says. Friendster appeared to have the energy, but whatever it had faded. And for all their size and power, Yahoo and MSN may have a tough time generating that kind of force as they roll out their social-networking sites. Right now, MySpace is generating enough juice to light up the Internet. If it can sustain that momentum, it could emerge as one of the most important Internet startups in years.
 Rosenbush is a senior writer for BusinessWeek Online in New York Edited by Phil Mintz
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