myspace fall back behind facebook

MySpace Trying to Put
on Fresh Face In Battle of
Social Networking Giants
New York. Wrenching job cuts at
News Corp ’s MySpace are only
the first steps the online hangout
must take to regain its cool.
Outshone by newcomers
Facebook and Twitter, MySpace
must reverse worrying trends in
user metrics and replace a
lucrative advertising deal with
Google worth $300 million year
that expires next year, or risk
lining up among Friendster,
AltaVista, GeoCities and other
once-mighty Internet brands.
That means redefining itself as a
music and entertainment site,
improving returns for
advertisers and maybe finding a
new home, analysts said.
“People are very fickle in social
networking,” said Jeffrey
Lindsay, a Sanford Bernstein
analyst. “Unless you’ve got a
way to keep them continually
refreshed, you get a five-year
life out of them and then after
that they ’re really not very
good.”
Some wonder if News Corp chief
executive Rupert Murdoch will
prove as fickle, although most
say a sale of MySpace is highly
unlikely in these markets.
News Corp bought MySpace for
$580 million in 2005, a move
that made Murdoch, the man
who made his fortune in
newspapers, look like a Web
visionary. But declining
advertising revenue trends and
the rise of Facebook means the
once-reigning teenage social
network is looking increasingly
middle-aged.
“The problem is that banner ads
on MySpace have not proven to
be successful, ” Forrester
Research analyst Josh Bernoff
said.
Facebook has ads that engage its
users better.
“You’re going to need a bunch
of smart people developing an
ad format that has these clever
features in it that make it work,”
Bernoff said of MySpace.
MySpace has a three-year search
advertising deal with Google that
guarantees the social network
$300 million a year. But it is
unlikely Google will sign up for
another round at the same
terms, analysts said.
Pali Capital analyst Richard
Greenfield estimated a new
Google deal could be worth half
as much, while some estimates
say it could be 75 percent less
valuable.
Instead, MySpace could try to
find a Google rival looking to get
a boost in the search game.
Some analysts speculate that
Microsoft is a possible contender.
Microsoft is “desperate to grow
their online business so they’re
in a similar position,” Lindsay
said.
“Google is so badly burned that
they’re not going to come back
with anything resembling the
original terms. ”
Breakingviews.com, an online
business commentary Web site,
speculated this week that
Sumner Redstone, whose Viacom
lost the MySpace bidding war to
News Corp, would love to match
the social network with his MTV
Music Networks.
Bankers and analysts say it is
hard to put a price tag on
MySpace when News Corp does
not provide detailed financial
accounts.
MySpace is part of Fox
Interactive Media, which is part
of News Corp ’s “Other” segment
that reported $1.9 billion in
revenue for the nine months
ended March 31, 2009. That was
down from $2.2 billion in the
same period a year before.
“It’s tough to value social
networking sites because no
clear business model has
emerged yet, ” said Robert
Jackman, joint head of the
technology, media and
telecommunications mergers
team at Jefferies & Company.
“Murdoch and others still have
time to make this work. Any
significant M&A in the space
would be somewhat of a bet”
until people figure out how to
sustainably make money off the
millions of users.
Music might be the answer. The
MySpace Music service — which
lets users share and discover
songs — has performed well,
analysts say, and some think the
social network could recast itself
as an entertainment-centric site.
That could bring in lucrative
advertising contracts with
studios, music labels and
entertainment companies, which
would have a good idea of the
audience they are reaching.
Such a move could let MySpace
make a dignified exit from being
the older player, after ceding its
position as the social network
leader to Facebook.
Facebook’s monthly unique US
visitor count rose to 70.278
million in May, edging ahead of
MySpace ’s 70.237 million visitors.
Globally, Facebook had 307.1
million visitors in April, far ahead
of MySpace ’s 123.3 million
visitors.
Reuters