MySpace vs. eBay? Site Leaps Into E-commerce

Social-Network Giant Tries Music Downloads and More

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NEW YORK ( -- Myspace, News Corp.'s star social-networking site, is under pressure to come up with a revenue-generating business model. It's already ramped up advertising and now is tapping into the $50 billion online-shopping and -classifieds market.

Like its ad model, MySpace's e-commerce efforts are immature, but analysts agree the potential is enormous. "What you've got with MySpace's friends network is a massive reputation-management system that is ideal for taking on eBay," said Gartner analyst Allen Weiner.

MySpace has provided classifieds and jobs listings for more than a year but said at a conference earlier this year it wanted to expand the efforts. That would pit the company directly against sites such as Craigslist and CareerBuilder.

"Given their traffic and market presence, MySpace has the potential to become a very powerful marketplace," said Greg Sterling, principal analyst of Sterling Marketing Intelligence. "The classifieds market is far from mature, and a ready source of revenue for MySpace."

Classifieds are one of the fastest-growing categories on the internet: Traffic increased 47% for the year ending July 31, according to ComScore Media Metrix. About 22% of connected consumers-37.4 million-visit those sites.

MySpace's new music-download service, detailed by the company last week, lets the site's independent and signed musicians sell their work directly from their profile pages. It's supported by a relationship with Snocap, a copyright-services company co-founded by Napster creator Shawn Fanning. MySpace and Snocap will get a cut of every track sold but are not saying how much.

Well aware that MySpace hosts more than 106 million profiles, Wall Street recognizes the company's ability to move markets. Responding to the Snocap deal last week, the research arm of Stifel, Nicolaus & Co. downgraded RealNetworks stock to sell from hold. Shares of RealNetworks, which runs the music-download service Rhapsody, were down more than 4% as a result.

By allowing users to self-publish, MySpace has become a launching pad for about 3 million musicians-from garage bands to big names.

"By introducing a powerful commercial tool set into the industry, we expect to see artists translate their community reach into sales," said Chris DeWolfe, CEO and co-founder of MySpace.

Those efforts could be aided by a partnership with Google. In August, Google agreed to pay News Corp. more than $900 million in ad revenue to serve as the search engine for MySpace and other web properties.

Analysts said the deal is likely to extend beyond search. "Extending Google's new Checkout payment service to MySpace would be a win for everybody," Mr. Sterling said.

Google also just partnered with eBay to roll out "click-to-call" advertising across Google and eBay sites-a deal that could expand to MySpace's giant network, he added.

U.S. e-tailers sold $49.3 billion worth of products (excluding travel and event tickets) during the first half of this year, according to the Department of Commerce, up 24.2% over the same period last year. EMarketer forecasts that e-commerce sales this year will total $108.5 billion, while online-ad spending will reach just $16.7 billion.

MySpace already is a force in e-commerce: It sends more traffic to shopping and classifieds sites than MSN and is fast coming up on Yahoo's tail, according to Hitwise. MySpace accounted for 2.53% of all visits to e-commerce sites for the week ending Aug. 26-up from 1.28% the week ending Feb. 25.

MySpace's market share of visits to all websites in that period increased a whopping 67%. It accounted for 4.88% of all visits the week ending Aug. 26, ahead of eBay, Amazon, Gateway, Wal-Mart and Craigslist.
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