The idea floated initially in the London Times that News Corporation might swap its Fox holdings in MySpace and IGN Entertainment, bought for just over $1 billion two years ago, for a big chunk of Yahoo, say all sorts of interesting things about the two proponents, if true. And if Yahoo was to agrees to hand out a 30% slice of itself in return for these assets, as the Times (owned by News Corp) suggests, that would represent a huge ten fold value increase on those assets in just two years.
Okay, last week the removal of Terry Semel, founder and CEO of Yahoo from his post and replacing him with Co-founder Jerry Yang possibly said more about Yahoo in particular. Both companies are concerned with traffic decline, and in the case of Yahoo that has a direct bearing on advertising revenues. At MySpace, given that exploitation of advertising revenues remains in its infancy, the weakness is more one of loss of momentum to rivals such as Facebook, and conceding mind share, than actual day to day revenue loss.
But internet ventures falter when the leaders of those companies can no longer see the wood for the trees. They cannot see why it is that the internet denizen is happier working with another site which operates differently. Either the site has lost its novelty, or another site does the same job better, or its audience has moved on to different pursuits. For Yahoo its weaknesses are perhaps not that it is losing existing habitual browsers, but the fact that it is no longer finding new ones.
Put yourself in the position of News Corporation’s Rupert Murdoch. It has lost control of DirecTV in the US, under pressure from disruptive shareholder Liberty Media’s John Malone. Its MySpace is now losing page views to upstart Facebook, the other social networking site that is a distant second to MySpace. Murdoch is now pursuing ownership of Dow Jones and its globally respected Wall Street Journal, and at the same time selling off 9 US TV stations and has various elements of his kingdom up for sale, for instance an outdoor advertising network, while at the same time gaining clearance this week from European Union regulators for permission to launch a rival User Generated Content site to YouTube, with partner NBC.
Most of these deals can be interpreted as tidying up the News Corp dynasty, so that the 76 year old media mogul can either launch some new offensive or to leave it in a cash rich, protected state for whichever of his family who takes over the reins next.
If MySpace was merged into Yahoo, it would be under Yahoo management; the Dow Jones deal takes News Corp into the stable world of financial information. There could be a Yahoo/Fox relationship built up very similar to the one between AOL and Time Warner, whereby its content strength could be focused on a single online property.
There would need to be some disentangling of the deal it has with Google to sell search revenues for MySpace, re-directing it towards Yahoo at some stage in the future, but as we understand it that deal was just for three years anyway.
This proposed deal of course was always thought to be in ‘early stage’ talks, and since it was a discussion with Terry Semel, and now he’s gone, likely to be off the agenda completely. In fact perhaps the talks were leaked primarily because they were already off.