What happened to MySpace?

How did it go from being the Goliath of social networking to a crumbling entity increasingly being seen as irrelevant by users, companies and advertisers?

A BusinessWeek feature story suggests MySpace’s demise was fuelled by a toxic brew of arrogance, hubris, technology issues, its acquisition by Rupert Murdoch’s News Corp., and growing competition.

Whatever the reason, MySpace has gone from being top of the social heap to an after-thought. And as BusinessWeek notes, MySpace’s value has crumbled even though the value (private valuations and IPOs) of social media companies is soaring as more people climb on the bandwagon and more advertising dollars flow into the marketplace.

Perhaps the biggest lesson other social networks can learn from MySpace’s demise is that confidence and complacency can be a dangerous combination. It may be difficult to remember but MySpace quickly and easily tossed aside Friendster and Tribe.Net as the leading social network. MySpace’s growth was astounding, which prompted Murdoch to make the $580-million deal in 2005.

Another problem that plagued MySpace was its usability. It went from flashy and compelling to busy and cluttered. Meanwhile, Facebook emerged with a cleaner, more attractive option with user-friendly features. Twitter also captured social media users who wanted a different kind of experience, even it meant one with no-frills.

While it’s difficult to fathom Facebook or Twitter losing their appeal, it is also important to remember that few brands have staying power. At some point, another product or service comes along that is shinier, sexier, more user-friendly or better.

As Facebook continues its ambitious mandate to become all things to all people and make its social graph ubiquitous across the Web, it could develop chinks in the armour that new services could take advantage of by focusing on a particular niche. So far, no one has really emerged as a viable rival but nothing is impossible.

In some respects, Twitter may be more vulnerable because it is a service with few features and a business model that is still in progress. Having 200 million users provides Twitter with clout but it would be interesting to see a new micro-blogging service appear on the scene that offers the same functionality as Twitter but with better features.

This, of course, is just speculation but the point is nothing is immune to competitive threats or a changing landscape. MySpace’s erosion shows that one day you can be king of the world, the next you’re standing outside the castle wondering what happened.

More: AllThingsD is reporting that MySpace could be sold for between $20-million to $30-million. The two names being suggested as buyers include Specific Media and Golden Gate Capital.

Given Facebook has more than 600 million users, the title of this blog post might be puzzling. How can anyone question the future of a service with so many users? In other words, Facebook is too big to fail.

Or is it?

Nothing lasts forever, including popular social media services. It could be argued social media services have a bigger challenge sticking around because social media users are fickle, not terribly loyal, and prone to quickly jump on something newer, sexier and shinier.One minute you have the hottest club in town, the next you’re wondering why the joint is empty.

It is important to remember that MySpace dominated the social networking market not that long ago, while Friendster was the leading player in the early days of social networking.

The uncertain future of Facebook was nicely encapsulated in an opinion piece by Douglas Rushkoff, who suggested that:

“….social media is itself as temporary as any social gathering, nightclub or party. It’s the people that matter, not the venue. So when the trend leaders of one social niche or another decide the place everyone is socializing has lost its luster or, more important, its exclusivity, they move on to the next one, taking their followers with them. (Facebook’s successor will no doubt provide an easy “migration utility” through which you can bring all your so-called friends with you, if you even want to.)

For people willing to consider the idea Facebook is vulnerable to becoming less popular, here’s a theory: the more services that Facebook launches to embrace more people, the bigger threat is creates to driving people away.

This theory works like this: As Facebook drives to add more people, the strategic path being pursued is adding more services such as location-based services (Places), e-mail and social commerce.

The upside is it gives users more options and services. The downside is it makes Facebook more cluttered and less focused on its core mission of being a place that lets people connect with family and friends. In other words, the more Facebook attempts to add more features, the further away it gets from its core raison d’etre.

The danger facing Facebook is it becomes so multi-faceted that people start to have trouble figuring out what do with it. This could create an opportunity for a new social network to create a service that has less frills but drives the core features that users really want. There would be fewer frills but that would be okay.

Admittedly, this theory might sound far-fetched given Facebook added 250 million users in 2010, and could add another 200 million 2011. Does this make Facebook invincible to something new and more interesting? In many ways, it does because size does matter and provides a huge competitive barrier to entry.

On the other hand, the social media landscape has shown itself to be fluid and dynamic. Companies that have dominated niches have seen their fortunes quickly change as new players come on the scene. To dismiss the idea of Facebook facing the same fate may seem like a remote possibility, it’s not impossible.