Facebook's Latest Competitor Is Nostalgically Familiar
In today's social media, Facebook (NAS: FB) holds a pretty significant lead over the rest of the competition, given nearly a billion members and all their data. Still, after the company's post-IPO performance as a public corporation, particularly with a cratering stock price dragging down the poor investors who jumped in as early shareholders, Facebook may have just opened the door for a most unexpected competitor: its old nemesis, MySpace.
MySpace isn't dead?
The concept that MySpace would offer any real competition in 2012 is indeed tough to believe. After all, this is the social-media site that tanked after Facebook surpassed it in worldwide visitors in April 2008. MySpace records just 54 million users -- surely that's no threat to Facebook's considerable bulwark, right?
An unexpected savior has pulled the company up by the bootstraps, however. Pop star Justin Timberlake -- along with Specific Media Group -- purchased MySpace for $35 million in 2011 from media company News Corp. (NAS: NWS) . Rupert Murdoch's company lost big in the deal: After dishing out $580 million for MySpace in 2005, News Corp. watched the company decline substantially in relevance. If the new ownership group can turn the site around in any meaningful way, Timberlake and his partners will have acquired the company for a steal.
On Monday, the "new MySpace" launched. On first impression, it looks a little like Facebook crossed with Windows 8. But this new MySpace unveiling boasted an important difference: The site seems to focus heavily on media sharing, music, and entertainment, rather than the bare-bones social angle of Facebook. Given the rising popularity of content-driven social sites such as Pinterest, which boasted more than 20 million users earlier this year after being launched in just 2009, perhaps it can work. But is this legitimate competition to Facebook?
A tough sell
It's hard to predict anything when Mark Zuckerberg's empire is still the big kid on the block. It's tough to argue with nearly a billion users. Facebook still boasts a myriad of apps and partnerships (such as its ties with social-gaming upstart Zynga (NAS: ZNGA) ) that MySpace couldn't hope to achieve this early in its rebranding. Considering that Zynga brought in 12% of Facebook's 2011 revenue, that's a lucrative and important point for Zuckerberg.
It's not as if Facebook's armor is flawless, however -- and the company has vulnerabilities that a fresh competitor (like a revitalized MySpace) could challenge. Numerous developers believe Facebook will face a tough road in mobile, an area that could greatly appeal to MySpace's music sharing. Questions circulating about Facebook's plummeting stock price and struggles in monetizing its service have further forced the company on the defensive. MySpace won't have to face despondent shareholders this early in the game, allowing the company to find its footing. Facebook doesn't have that sort of freedom any more.
Finally, there's the very real chance that MySpace's content-driven system, if successful, won't meaningfully draw away Facebook's user base but may simply co-exist with the social giant. MySpace, if successful in establishing its apparent niche, could simply evolve into a premier content-sharing site while Facebook remains the go-to social giant. Social-media staples such as the aforementioned Pinterest, Twitter, and LinkedIn (NAS: LNKD) took the same route, and all carved out substantial niches in the sector.
Considering LinkedIn's value at more than $12 billion -- and Pinterest estimated at a value of $1.5 billion -- there's certainly a profitable route to circumventing Facebook's monolithic presence, rather than attacking it head-on.
Learning past lessons
Overall, I'm skeptical that a successful relaunch of MySpace will threaten Facebook's substantial user base, although investors interested in Facebook should keep an eye on this development. After all, it was the upstart Facebook that ended MySpace's reign in 2008. Still, the new MySpace seems to have learned the lessons of ill-fated social-media startups of the past that challenged Facebook's hegemony directly. Zuckerberg's empire should continue to rule social media, even with its oldest competitor rising from the grave.
Facebook just might be the most talked-about company in America, and while it rules its sector thanks to an eye-popping user count, this company will face a number of hurdles and challenges in the future. Get all the information you need to know about social media's flagship company with the Fool's premium guide to Facebook's opportunities and risks. Don't be left in the dark by what's in store for this titan. Get your report and read more by clicking here.
The article Facebook's Latest Competitor Is Nostalgically Familiar originally appeared on Fool.com.Fool contributorDan Carrollholds no positions in the stocks mentioned in this article. The Motley Fool owns shares of LinkedIn and Facebook.Motley Fool newsletter serviceshave recommended buying shares of Facebook and LinkedIn. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days. The Motley Fool has adisclosure policy.