What MySpace-Facebook Rivalry?

Talk of a brewing showdown between the two social networks masks fundamental distinctions between the sites' leadership, culture, and ability to make a buck

by Sarah Lacy

Facebook founder Mark Zuckerberg (left) and MySpace CEO Chris DeWolfe Daniel Acker/Bloomberg News, Evan Agostini/Getty Images

Into the wee hours of the morning on Oct. 18, News Corp.'s (NWS) MySpace treated Silicon Valley's elite to a very L.A.-style party at the San Francisco Museum of Modern Art. Thumping deejay beats, swirling lights, barely clad blonde models, and an open bar greeted Bay Area bloggers, geeks, venture capitalists, and the wunderkinder running successful Web 2.0 startups.

The message was clear: MySpace is on the move northward. Beverly Hills-based MySpace, the world's biggest social network, is opening a Silicon Valley office and plans to hire hundreds of Valley engineers, News Corp. CEO Rupert Murdoch and MySpace co-founder Chris DeWolfe had said earlier at a conference. What's more, Murdoch and DeWolfe said they'll make it easier for software developers everywhere to create applications for MySpace, a move made to much acclaim by rival Facebook in May.

Those were among the few nuggets of news emanating from O'Reilly Media's annual Web 2.0 Summit, which also featured Facebook CEO Mark Zuckerberg, who said as little as possible about reports he's lining up financing that could value his company at upwards of $10 billion (BusinessWeek.com, 10/17/07).

Google and Microsoft Are Watching

It's tempting to view MySpace's moves as part of a push to become more Facebook-like, an early salvo in a brewing battle of the social networks. After all, MySpace and Facebook are two of the very few breakout, mass-market successes of this generation of Internet companies. Both are trying to build multibillion-dollar businesses from connecting people with their friends online. Both sites feature profile pages, friend lists, and the ability to share photos, videos, links, and blogs. And thanks in part to rapid growth and sky-high user numbers, both are shrouded in hype.

What's more, both are catching the attention of technology's titans: Google (GOOG) bought the right to place search ads on MySpace pages in a multiyear, $900 million deal, while Facebook struck a similar deal with Microsoft (MSFT) that's also in the hundreds of millions of dollars. And then there's the speculation Zuckerberg is near an investment deal with Microsoft, Google, or Yahoo! (YHOO) that would give Facebook a multibillion-dollar valuation.

But here's the rub: Differences between the sites far outweigh their similarities, and there's less overlap—and competition—between MySpace and Facebook than would appear. There may come a day when so many people are on social networks that luring new users becomes a zero-sum game, a nasty street fight for eyeballs and ad dollars. But we're nowhere close yet.

At California's Cultural Divide

You won't have trouble convincing Facebook and MySpace they're not competitors. Zuckerberg rolled his eyes when I told him I was writing a column on this subject. "That only invites the comparison," he said. "Why don't you write about whether or not we're like Google?" he added, referring to their similarities as technology companies.

I'll consider that for a future column, Mark. But when it comes to MySpace and Facebook, while both are social networking companies, at heart they're very different businesses being built by very different entrepreneurs, in two California cities that couldn't be more distinct.