Can MySpace get its mojo back?
With Facebook soaring, and top talent leaving, News Corp.'s social network needs answers.
NEW YORK (Fortune) -- MySpace, the News Corp.-owned social networking site, is off to a rough year. Growth has slowed (the number of U.S. visitors has hovered around 75 million for the last seven months), top talent is leaving the company, and like other media companies, it is feeling the effects of the slowing economy: a MySpace executive this week told FORTUNE that ad sales dipped in January and February.
This all comes after a disappointing 2008, in which analysts estimate MySpace posted revenue of about $600 million - far short of the $1 billion target set by its parent company.
MySpace seems to be falling behind Facebook in the all-important race to sign up new users. Facebook now has more than 57 million U.S. visitors, up 41% from a year ago. And internationally, the site has leapt ahead with 236 million visitors to MySpace's 126 million in January, according to Comscore measurements.
To be sure, MySpace isn't failing. Its loyal fan base spends a whopping 266 minutes a month on the site, according to Comscore, and marketing president Jeff Berman tells us ad sales for March are looking "much, much better." Among social networks, MySpace is the only site so far to come up with a business model that squeezes substantial revenue out of the site.
Still, the company simply isn't as hot as it was four years ago, when Rupert Murdoch & Co. paid $580 million for the site's parent company, Intermix, as a way of broadening News Corp.'s (NWSA) online portfolio. CEO Chris De Wolfe and President Tom Anderson became celebrities in the business world, with DeWolfe attending the World Economic Forum in Davos, Switzerland.
Can MySpace catch fire again? DeWolfe, whose contract with News Corp. reportedly is up for renegotiation in October, promises big changes are in store for users and advertisers. In a widely distributed internal memo, he recently pledged "major new launches including payments and virtual goods" as well as new music developments such as "international rollout, and new functionality including charts, ticketing, and merchandise."
But the site is trying to innovate even as some of its top entrepreneurial talent is bolting. Chief operating officer Amit Kapur, an early employee with a reputation for sharp thinking, recently announced he was leaving to start a new venture. He's taking with him two MySpace senior vice presidents, Jim Benedetto and Steve Pearman.
The moves follow the departures last year of MySpace cofounders Josh Berman and Colin Digiaro, who started a News Corp-owned digital incubator, Slingshot Labs, that will build Internet media companies from scratch. (Slingshot's first venture, celebrity gossip site DailyFill.com, launched Feb. 24. DeWolfe sits on the new company's board.)
MySpace faces the same problem as a lot of tech companies: it is filled with entrepreneurs who prefer to start new companies rather than work for big conglomerates such as News Corp. News Corp., meanwhile, has been filling the organization with more seasoned executives from established tech corporations, such as Yahoo (YHOO, Fortune 500) and Symantec (SYMC, Fortune 500).
To revive MySpace, the company needs a bit of both worlds: It needs to hold on to the entrepreneurs who will help it come up with cool innovations and products that keep users coming back for more. (MySpace has much to boast about in this area: In the last year it has introduced a product that lets advertisers target their ads to very specific demographics, and it debuted self-service ads that are easy for small businesses to get up and running with a few clicks.)
But it also needs the discipline that tech veterans can bring to the table. And in this tough economic environment MySpace can't afford to miss a step.
Know anyone who shows extreme brand loyalty to the point where it's an obsession? We're looking to talk to people who make a lifestyle out of their love of a certain product or brand. It could manifest itself in tattoos, major collections, a themed wedding, or some other tangible example. If you or someone you know fall into this category and are interested in talking with us, please email Beth Kowitt (bkowitt@fortune.com). 
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