Unfortunately, MySpace started up about six months before LiveJournal removed the invite system, and clobbered LJ by seeding themselves with 20 million accounts on the first day. At that time the demographics for MySpace and LJ were roughly the same, and most people simply followed their friends onto MySpace. The coup de grace came a month after the invite system was removed, when Facebook was launched.

I'm not saying that the invite system was the only mistake they made, but it cost a year or two of lead time and allowed competitors with much deeper pockets to make up the gap.