If you were Mark Zuckerberg asking HN "Compete with MySpace?" a few years ago, you'd likely get the same advice you'll get now: they're way out in front of you and you'll have a much better shot at success if you pick a different niche.

The Bad News: You'll almost certainly fail if you try to take on Facebook.

The Good News: If you succeed, you'll almost certainly be a billionaire.

If you wanted to do this, I'd recommend reading up on what the Diaspora guys are doing and beat them at their game rather than attacking Facebook head-on.