I had a really interesting conversation with a friend yesterday about the fortunes of Facebook versus MySpace, and by fortunes I mean revenue i.e cold hard cash. 

When Rupert Murdoch paid $580 million for MySpace in July 2005 I always felt he had a master plan regardless of NewsCorp's previous failures in the online world.  NewsCorp is a joggernaut in the media industry and was always going to capitalise on this investment, and it did just that by selling it's search and advertising business to Google for $900 million. Although this deal was for a few of the websites controlled by Fox Media Interactive; a subsidiary of News Corp, MySpace is the pick of the bunch and was the basis of the deal.

The rise of Facebook has been nothing short of phenomenal, the company has recieved over $240 million in investment, with some of the investors being the Samwer brothers of Jamba fame and Microsoft .  These investments have valued Facebook at $15 billion.  Microsoft is not crazy even though it paid $240 million for a 1.6% stake in Facebook, this investment buys it the exclusive rights to manage the advertising network on facebook and effectively blocked Google from doing the same as it had done with MySpace.

My friend and I both agreed that it's fairly safe to assume that most "Web 2.0" companies are not going to realise the valuations associated with them.  Nonetheless my assumption is that MySpace will survive largely due to the influence of News Corp and its vast array of content.  This content continues to attract people to the site in droves, these eyeballs are what translate into lucrative advertising revenue.  Myspace has also taken a lead on using social networking to promote events, music and films.

Now, the revenue model for both of these businesses is advertising and as of March 2007 MySpace was generating $30 million a month in revenues, according to emarketer the 2008 estimates would see MySpace generating $850 million in advertising revenue as opposed to $305 million by Facebook.

Ironically I actually can't stand MySpace - it's way too busy for me and prefer the lifestyle utility concept favoured by Facebook.  The issue of revenue models in the online world is one which has occupied my mind over at mendmypc, in the end I still do not believe it will be possible to ignore the vast amount of advertising revenue up for grabs even though I am not building the next Facebook.