Myspace – the rise and fall.

News Corp has recently agreed to sell Myspace for $35 million. Myspace, the leading social network before the dominance of Facebook, was purchased by News Corp in 2005 for $580 million.
At time of acquisition Myspace was the 5th most popular web site world-wide. Less than one year later it was the 2nd most popular site and News Corp was claiming in Fortune magazine that Myspace represented the biggest growth opportunity the company had. A Multi-billion dollar valuation was speculated.
Five years down the line and the fast moving nature of the Internet, and in particular the rise of Facebook, has destroyed that value.
Interestingly Myspace has not actually declined in terms of user numbers. It Currently reports 34.9 million users per month. In 2005 at the time of the News Corp acquisition that number stood at 27 million users. So Myspace has been growing, but not as fast as needed to keep pace with the Market it was in.
By contrast Facebook Has recently reported 750 million monthly users. In 2005 at the time of the News Corp Myspace acquisition Facebook’s monthly user number stood at 5.5 million.
So Myspace was 5 times the size of Facebook but News Corp could not keep pace with the subsequent growth of it’s competitor.
It seems like rate of growth is the key indicator for high speculative valuation. But it’s increasingly hard to drive further increases in valuation when the growth starts to slow or even plateau. So can Facebook maintain it’s dominance when it’s user numbers start to plateau (they can’t keep on rising forever). Or will it go the way of Myspace?