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Three years ago, social networking sites were largely the province of Internet geeks and diehard business networkers. Today, MySpace, the world’s largest networking site, has more than 102 million members, and is at the center of an entire ecosystem of startups and established firms serving up advertisements, content, and software that members can use to enhance their MySpace profiles or find friends more easily.

This “MySpace economy” parallels the mini-industries that have grown up around sites like Google, the focus of scores of “search-engine optimization” companies, and eBay, which encourages third-party software developers to build tools to make buying and selling on the auction site easier.

But as a platform for other businesses, MySpace may be far less stable than these other Web giants.

For one thing, its parent company, Fox Interactive, is not especially welcoming toward outside services that interact with, or depend on, MySpace’s servers. Last year, Fox banned users from adding videos from the leading video-sharing site, YouTube, to their MySpace profiles (the ban was revoked after users loudly protested), and threats of legal action from Fox Interactive have prompted the shutdown of several automated “MySpace mashup” sites that dip into MySpace profiles for information about, for example, a member’s dating status.

And while MySpace users represent a massive and still-growing marketplace – some 200,000 people joined the site on Tuesday, August 16, alone – actual traffic on the site has leveled off this summer, leading some commentators to speculate that the site’s popularity among young trendsetters has peaked. “The bloom may be falling from the MySpace rose,” writes Nicholas Carr, former executive editor of the Harvard Business Review and author of Does IT Matter?

To be sure, MySpace is one of the Web’s most remarkable success stories. Since its founding just three years ago, the site’s combination of simple tools for finding friends, customizing profiles, and sharing music and videos has helped it spread virally among teens and 20-somethings around the English-speaking world, leaving older networking sites such as Friendster far behind. “If you’re not on MySpace, you don’t exist,” as one high-schooler told Berkeley social networking researcher Danah Boyd. Indeed, MySpace is the sixth-most-trafficked website on the Internet, pulling in 15 to 20 million page views per day.

Ads on the site also account for 17 percent of all display advertising on the Internet, according to a July study by Nielsen/NetRatings. That makes MySpace irresistible to advertising companies such as Google, which recently promised $900 million to Fox Interactive Media over the next three years in exchange for the exclusive right to place keyword-based text ads on the site, as well as any display advertising not sold directly by Fox.

With Google and its peers wooing MySpace – the search company reportedly outbid both Yahoo and Microsoft’s MSN for the advertising contract – it’s no surprise that many smaller Web companies also sense profits in the making. One such firm is San Francisco-based Browster, creator of a free “browser-in-a-browser” program that allows Firefox or Internet Explorer users to quickly preview the sites listed on any given Web page, without the need to click through to those sites (see “Revamping the Web Browster”). The newest version of Browster’s tool, released on August 14, recognizes MySpace profiles (typically lists of friends) listed on a given member’s page and compresses them into highly simplified views that dispense with the distracting graphics and music found on many MySpace profiles. Browster has no direct financial relationship with MySpace; instead, it earns money by charging search engines and other companies for placement of their search boxes in the Browster window.

“MySpace is great for self-expression, but it’s painful for users who just want to move through lists of friends and people they might like to meet,” says Scott Milener, Browster’s CEO. “It gets very tedious, especially with these weird backgrounds and blue text and music playing. We give a clearer, simpler view that’s faster and that actually reduces the load on MySpace’s servers.”

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