Could MySpace Be A Bigger Threat To Microsoft Than Google?

Includes: GOOG, MSFT
by: Eric Savitz

Here’s a provocative idea, courtesy of Max Levchin, a co-founder of PayPal, the chairman of Yelp and CEO of a Web 2.0 company called Slide. Speaking on a panel about social communities at the Software 2007 conference today, Levchin asserted that MySpace today looks like Microsoft (NASDAQ:MSFT) in the early days - a budding operating system.

“Social communications software are becoming operating systems in powerful ways…identical to Microsoft,” he said. With Windows and desktop computing, he says Microsoft locked up personal data in complex file systems. But he says personal data is increasingly moving off the desktop and into the Internet cloud, controlled by companies like MySpace (which of course is owned by News Corp. (NASDAQ:NWS), which as you know is trying to buy Dow Jones (DJ), which publishes this blog and employs yours truly).

Once companies like MySpace get control of personal data - photos, videos, blogs, bookmarks and other information - “they are going to keep it,” Levchin says.

Levchin says Google (NASDAQ:GOOG) can’t take on Microsoft in this way - but he says MySpace and its peers in social community on the Web can. “PCs don’t matter. Your Web top matters. That is where your online identity is going to live. Microsoft can lose to the online consumer community.”

Levchin says that despite the proliferation of players in social networking, he finds it likely that, like Microsoft in operating systems, a single company is likely to become dominant. Says Levchin: “Someone will own the thing, like Microsoft.” And he notes that in social networking sites, MySpace has about 82% market share at the moment. “There is natural leadership in locking up data.”