Facebook's new challenge for MySpace

Facebook, the privately-held social network company, has to do a great deal [subscription required] to make it different from MySpace, the largest property in the field and a unit of News Corp (NYSE: NWS). Nielsen/NetRatings puts April unique visitors for MySpace at 57 million and Facebook's at 14.4 million.

According to The Wall Street Journal, Facebook will allow companies to provide services on special pages within the site. As an example, "a media company could let groups of users share news articles with each other on a page inside Facebook." This "sharing" of products and services program may help companies make sales. It may or may not, however, keep users on the Facebook site for a longer period of time.

Facebook is free. Free services make some sense if the company has a core service that brings in a good deal of money, much like Google Inc. (NASDAQ: GOOG) does with its text advertising business. But Facebook has no central revenue engine that generates billions of dollars. It is hard to see how offering a service at no charge is of much benefit to the website's owners.

One of the by-products of the Facebook offer is that it could pressure MySpace to offer a similar service if marketers end up making money based on the new Facebook service. Being part of News Corp, MySpace's imperative to bring money to the parent sometimes creates a conflict between MySpace offerings that users may want and offerings that bring in revenue.

The Facebook program may be ill-advised, but it could do some competitive harm to its larger rival.

Douglas A. McIntyre is a partner at 24/7 Wall St.