Happy New Year for Facebook, Not So for Myspace

Facebook is ringing in the new year with a deal with Goldman Sachs Group and others to raise $500 million—funds that will allow the social networking colossus to stay private longer.  Facebook’s deal marks a growing trend in Internet companies, including Twitter and Groupon, accepting capital to stay private longer.  By investing in Facebook, Goldman Sachs Group is also establishing an investment fund to allow its clients to buy Facebook shares.  The catch?  Clients must invest a minimum of $2 million and agree not to sell shares until 2013.  In more good news for Facebook, the investment deal values the company at $50 billion, which is up $10 billion from just six months ago and reflects the company’s increasing expansion.

Facebook’s challenger in the social networking game, Myspace, is experiencing a less happy 2011 as it braces for massive layoffs—of up to half of the company’s nearly 1,100 employees.  This move marks the latest trouble for Myspace as it struggles to compete with Facebook’s explosive popularity.  In November, Myspace had 54.4 million unique U.S. visitors—down 15 percent from last year—versus Facebook’s 151.7 million unique U.S. visitors.  Myspace responded to the decline by laying off nearly a third of its staff last summer, but further reductions are needed to keep Myspace from getting crushed under its $156 million first quarter operating loss.

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