MySpace defeats YouTube in war game

Which business model is likely to be the most successful: MySpace, YouTube, Facebook or Second Life?

According to a war game played out at London's Business School last week, MySpace wins. But, in a conclusion that was validated by this week's Viacom lawsuit against Google and YouTube for copyright infringement, the participants concluded that both MySpace and YouTube are vulnerable to legal attacks and government regulations that target illegal activities and objectionable content, like child pedophilia and pornography.

Copyright lawsuits will be a "major distraction at best or they could undermine" the businesses, says Leonard Fuld, president of Boston-based Fuld & Co., which ran the war game. "Sexy and cool as MySpace and YouTube seem, they are prone to attacks."

Meanwhile, the team of students representing MySpace successfully convinced the panel of experts who judged the war game that MySpace has the most viable business strategy among the social network sites. "MySpace won the game by a fairly good margin. They had a much better argument: that content is king," Fuld says. "MySpace won the strategy event...whether it will win the war" is unclear.

YouTube and Facebook were nearly tied in the war game competition. Virtual reality community Second Life came in last. YouTube needs to come up with a monetization strategy, while Facebook is likely to face a "growth crisis" as its members age and graduate from college. Second Life, with only 3 or 4 million users so far, may not be able grow on a megascale, Fuld says.

The war game could be seen as more than an intellectual exercise, as some predictions from previous war games later came true. For instance, Google came out the winner of a 2005 search engine war game in which the Microsoft team cut an advertising deal with AOL, and Google's team regretted letting the AOL deal get away, Fuld says. Seven months later, Microsoft and Google were courting AOL in real life, and Google and AOL made a deal that expanded their search engine partnership to include collaboration on ads. (Google also beat out Microsoft for an ad deal with MySpace last year.) Another previous war game predicted that Apple would announce an iTV, presaging the company's announcement of its Apple TV, code named iTV, this January. Last week, war game participants predicted that Apple will go into the social network space.