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MySpace, once the golden standard for social networking sites, is rumoured to be teetering on the edge of bankruptcy. On June 16 the company announced plans to lay off almost 30 per cent of staffers, roughly 430 jobs.

MySpace was purchased by NewsCorp in 2005 for $580 million - largely considered a bargain at the time - but since then its profile and user numbers have declined significantly. One report suggests that the number of MySpace users dropped two-thirds in the past year alone, as MySpacers likely jumped over to Facebook, Twitter and other social networking sites.

Probably the real reason MySpace had to cut staff is that after all these years NewsCorp hasn't found a way to make social networking profitable, while the company is also struggling to keep its newspapers and networks afloat in the digital age. MySpace does sell some ads, but that revenue never quite covered the costs of hosting a massive network of personal pages, fending off lawsuits, monitoring content and keeping their product up to date.

A lot of networkers clearly prefer Facebook, which has a cleaner, more organized feel and offered a lot more functionality from the get-go. Truth be told, some of the ugliest personal profiles I've ever seen were on MySpace. Facebook doesn't have that problem because there aren't too many ways to customize your home page, and everybody's locked into that cornflower blue-on-white template. Facebook figured out, like Apple did, that people prefer simplicity.

But Facebook was reportedly losing users to a higher degree of simplicity and the rise of Twitter, which in turn prompted a massive Facebook redesign that emphasized status comments over other personal information in order to appear more like Twitter.

Meanwhile the number of Twitter users has exploded recently, reportedly doubling last March alone after getting some time on Oprah, but the number of repeat users - people logging on a second time - is still only in the 40 per cent range. People either don't get it, or they do get it and just aren't that impressed.

Now Twitter and Facebook are hitting the same wall as MySpace, Second Life, YouTube and many others in the social networking industry - how do you cover your costs and turn a profit when you're offering people a free service? Advertising is basically the only avenue at this point, but it doesn't really pay the bills fast enough for investors. To make matters worse, users rarely click on ads, and there is a limit to how many ads you can place on a page before a social networker will log out for good amid cries of "sell out!"