MySpace lays off 30 percent of staff as Facebook becomes No. 1

Just after Facebook blows by MySpace to take over the number one spot in the social networking world, MySpace announces it is laying off 30 percent of its workforce. That's 420 workers being cut.

It seems Facebook's handwriting is all over MySpace's wall. MySpace has time to re-cast the site, hold its audience and possibly grow. It's difficult, though, to get in the way of momentum.

That's exactly what MySpace is trying to do since hiring former Facebook COO Owen Van Natta as its new CEO in April, replacing co-founder Chris DeWolfe as CEO. DailyFinance received a copy of the memo Van Natta sent to his MySpace employees asking for their "patience" with MySpace's workforce cuts.
The cuts and hiring of Van Natta are necessary as MySpace moves to stop the ongoing defection of its audience. MySpace has lost one-third of its audience, except for video use, from April of last year to April of this year, according to Nielsen Online, which measures Web audiences.

Facebook is showing its growing relevance as it saw six million of its members grab usernames over this past weekend. Facebook and this year's hottest social-networking site, Twitter, should keep a wary eye on the happenings at MySpace.

Twitter is the subject of a 140 Characters Conference at New World Stages in Manhattan, which my DailyFinance colleague Jeff Bercovici wrote about today. While Twitter is the darling of the Web at the moment, as MySpace was a few years ago, both Facebook and Twitter could face growing pains and executive reshuffling if they aren't careful about their growth in the coming years. (See our DailyFinance story on that from June 12.)

With that in mind, consider the language from Van Natta's memo to MySpace employees. In it, he wrote, "This week, we will communicate the foundation for our company strategy," which suggests he is already formulating a success plan as he sets out to visit various company offices, starting Wednesday.

"This is the first difficult step toward a major turnaround," he wrote in the memo. "A step that will not only shore us up in the short term, but position us for long term success. We need to become a more innovative company."

He plans to do that with fewer on the MySpace team as they will reduce the number of employees to 1,000, from 1,420, affecting all units of the company, he said in the memo. TechCrunch reported last week that My Space was preparing to lay off 25 percent or more of its staff, after laying off five percent last year.

"The company's size became unsustainable," Van Natta wrote. Smart words for Facebook and Twitter to pay attention to as they staff up for the growth they're seeing in 2009.

In the meantime, the battle for social networking users continues.

Anthony Massucci is a senior writer for DailyFinance. You may follow him on Twitter at hianthony.
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