Back in October, News Corp. (NYSE:NWS) made what may have been its final bid to make its $580 million purchase of Myspace.com worthwhile — a redesign that included a streamlined interface that recalled nothing if not Facebook, the booming social-media network that made MySpace mostly irrelevant in just a few short years.
More significantly, the redesign coincided with a new advertising contract with Google (NASDAQ:GOOG) that did away with much of the dense text ads that cluttered MySpace profiles. The hope was these measures would finally staunch the MySpace wound, ending the business’s streak of losing its parent company about $100 million each year.
So how did that work out? Let’s just say the redesign and new ad deal didn’t keep News Corp. from gutting the company’s work force. More than 500 MySpace employees were laid off last month. Meanwhile, the cost of the redesign and plummeting ad revenue translated to a loss of $275 million in the last three months of 2010, tripling MySpace’s annual loss from 2009.
It’s time to sell MySpace, but News Corp. seems hesitant to take the plunge. As MySpace CEO Chase Carey said during Wednesday’s earnings call, “[a sale] is sort of incoming, we’re not soliciting anything at this point.”
Here are three major reasons to unload MySpace immediately:
MySpace Music is still viable, but not for long.
The only category where Facebook hasn’t completely supplanted MySpace is as a promotional tool for musicians and record labels. One aspect of the October redesign that actually worked was the remodeled artist page and music player options.
Still, the only reason these pages remain well-trafficked is because no competitor, outside of Google’s YouTube, has created a viable alternative. News Corp. needs to leverage MySpace Music as a major value proposition before Facebook, Apple (NASDAQ:AAPL), or Amazon (NASDAQ:AMZN) begin providing comparable tools to musicians struggling to promote themselves in the digital landscape.
Ad sales aren’t coming back.
Three years ago, Amazon-owned Internet traffic tracker Alexa.com placed MySpace in the top 10 most-trafficked sites in the world, with Facebook trailing by just a little. By April 2008, Facebook had surged ahead.
Now Facebook is the second most-trafficked site on the Web. While MySpace hasn’t totally fallen from grace at No. 56, that still isn’t exactly going to curry favor with advertisers who are just beginning to spend online again. No matter what, the profitable advertising revenue that came from major film and other entertainment promotions has moved to Facebook and Twitter.
It’s entirely possible, however, that a foreign buyer could use MySpace’s infrastructure to build a healthy business — not in the U.S., though.
Users aren’t coming back.
As a promotional tool, MySpace still has value. As a viable social network in the west, it’s deader than disco. The final nail in the user-growth coffin was, surprisingly, the 2010 redesign of the site. The moment that Facebook Connect –that site’s log-in tools that integrate with third-party websites like Yahoo (NASDAQ:YHOO) — was integrated into MySpace last November was the moment the site’s social-network were finally ceded ambitions to Facebook.
As with MySpace’s viability as an ad sales revenue generator, there is no more hope for growing the diminished profile base, at least in the West. It’s possible a buyer could find great potential in building the social network abroad in India or Brazil, where social networks like Orkut still haven’t established an unshakeable monopoly.
At the time of publication, Anthony John Agnello did not own a position in any of the stocks named here.
