MySpace CEO's exit stresses social-media hurdles

SAN FRANCISCO -- The resignation of MySpace CEO Chris DeWolfe late Wednesday underscores the unrelenting pressure it and its rivals face in a down economy: turning their popular social-networking sites into money-making ventures.

A diminished role for DeWolfe as a company strategist — and the uncertain future of MySpace's other co-founder, Tom Anderson — underscores tumult not just at MySpace but for its peers.

Facebook has suffered a brain drain of sorts as it preps for a highly anticipated initial public offering, which analysts speculate could happen this year. Its CFO, Gideon Yu, abruptly left the company this month. Twitter is frequently being mentioned as a takeover target of Google despite a healthy war chest. And tech analysts predict consolidation among the crowd of lesser-known social-networking services.

"When you're around five years (as MySpace and Facebook have been), the pressure to monetize intensifies," says Caroline Dangson, research analyst at IDC. "It's already a horrible time for established businesses to make money during the recession. The assumption was that advertising would pay the bills for social-media firms, but (display) ad spending is down — which is crucial to these guys."

DeWolfe, 43, and Anderson, 33, helped build MySpace from seven employees in January 2004 to 1,600 today and turned it into one of the most popular sites.

Still, the shake-up at MySpace is not surprising — three other executives quit last month to start a company — given MySpace's sputtering growth and the rise of rival Facebook.

Facebook passed MySpace in overall users worldwide last year. It now has 200 million to MySpace's 130 million.

MySpace is still the largest social network in the USA, but its year-over-year numbers slipped 4%, to 70.2 million, in March, according to market researcher ComScore. Facebook's users in the U.S. rose 72%, to 61.2 million.