MySpace pulls in massive profits, but at what cost?

For quite some time now the focus has been on the credit crunch, and that focus has been amplifying considerably in the last few months as the collapsing of major banks and government bailout of those that survived seems to have crunch credit so densely that it might cause a black hole to open up from the Treasury's ledger books.

One concern of mine has been the effect on the tech world. As some may have figured by now I am somewhat of a tech geek and shudder to think that the slumping economy would cause venture capitalists to stop funding web 2.0 startups that don't immediately pull in revenue streams.

MySpace.com has alleviated that anxiety a bit with reports that it is en route to posting a profit this year of $1 billion or more. By no means is this site a web 2.0 startup, but it's success may give solace to investors who have been told for some time now that social networking is struggling to profit from ad revenue.

On the other hand I predict that MySpace will fail in the not-too-distant future.

Ever since Rupert Murdoch's News Corporation bought the site for $580 million in July 2005 it's become less and less MySpace and more and more AdSpace. The resulting product is an ugly oversold site that still has the same web development problems it had since it's inception. So while the revenue stream for this year sounds promising, at what cost does it come? It's not long before MySpace is just monetized to death.