NEW YORK - As Facebook Inc.' s fortunes soar with a blockbuster US$50-billion valuation, the popular online social network's once-mighty competitor, MySpace Inc., is stumbling.

Job cuts of as much as half of the site's 1,100 employees are looming and its parent company, media mogul Rupert Murdoch's News Corp., is mulling a plan to put the business on the auction block.

The social network's gloomy turn marks a dramatic shift from the coup it was considered in 2005 when News Corp., owner of Fox News and the New York Post, swooped in with a US$580-million takeover.

MySpace's estimated worth soared in its first couple of years under ownership of Mr. Murdoch, who was heralded as a visionary Internet genius.

In 2007, it was the most visited site in the United States, beating Google Inc.' s Google.com.But MySpace started falling out of favour with fickle Web-surfing consumers who headed for the more innovative Facebook.

While MySpace plummeted to the No. 7 most-visited site by the end of last year, six-year-old Facebook has taken the top spot with nearly 9% of all U.S. visits, just ahead of Google.com's7.2%, according to online measurement service Experian Hitwise.(When all of Google's sites, such as YouTube and Gmail, are factored in, the Internet giant still reigns supreme with nearly 10%.)

Wall Street analysts say a sale is likely in the coming months and News Corp. would be lucky to get a fraction of what it paid for MySpace, which is headquartered in Beverly Hills, Calif., and made its debut in 2004.

"It's a rapidly shrinking asset and even after they slash costs there are still a lot of costs associated with it," said Lou Kerner, a social-media analyst with Wedbush Securities and former chief executive of early networking site Bolt.com."If smart, innovative people get hold of it, they can turn it into something of significant value. As part of News Corp., it is probably doomed."

News Corp. could still rack up some profits on its investment, however, by keeping a stake in MySpace, Mr. Kerner added. "It has a great core audience around music and a lot of people still use it."

MySpace, launched by employees at then public company eUniverse after they saw the success of Friendster, had first-mover advantage over Facebook.

But its founders, including the now 44-year-old Chris De-Wolfe, lacked the tech savvy of those at its younger rival, including Facebook's college-aged chief executive Mark Zuckerberg.

Once in the hands of News Corp., innovation seemed to be stifled further.

While MySpace changed little, Facebook introduced a news feed -- allowing users to get the latest on all of their friends without the inconvenience of clicking on each of their profiles -- and then opened its platform to what became wildly popular application innovators, such as FarmVille.

"Facebook has built a better mousetrap," said Richard Dorfman, who runs Richard Alan Inc., a media and entertainment investment firm in New York. "MySpace got tremendous resources at its disposal [after being acquired by News Corp.], but ultimately there are elements of innovation, creativity and entrepreneurialism that are lost once you're thrown in as part of a big conglomerate."

That notion helps explain Mr. Zuckerberg's resistance to selling Facebook, including rebuffing a US$15-billion offer from Microsoft Corp., and his plan, for now, to keep the company privately held to avoid worrying about the effect a zigzagging stock price might have on innovation.

Facebook's lofty US$50-billion valuation, scored this week with a US$450-million investment by Goldman Sachs Group Inc., makes the fledgling company with its roughly 2,000 employees worth more than Boeing Co., the United States' largest exporter.

jwhitman@nationalpost.com