Back in March when Jonathan Miller was recruited as CEO of MySpace from AOL, change seemed to be in the air for MySpace. When first quarter financials for owner News Corp came out at the end of March the reason for the move seemed clear, advertising sales were falling among the Fox Interactive properties and the deal with Google, which supplied a considerable amount of that revenue – $900 million over 3 years ‘ was about to be renewed, and dramatically downgraded.
It is coincidental, but appropriate that this week MySpace was overtaken in traffic terms by Facebook, after several years of gradually pulling up behind it. Facebook worldwide now has 307 million users, way ahead of MySpace globally, says comScore, and in the US it just overtook MySpace with both on roughly 71 million.
So it came as little surprise that after Miller had shuffled the furniture, brought in some of his own team members, and got rid of one of the founders, Chris DeWolfe, that a new strategy would emerge. Immediately the company will now lay off 400, or 30% of its staff, leaving it still more heavily staffed than Facebook, and leaving the world wondering what MySpace can do to revitalize its fortunes.
It’s going to be an uphill struggle. Most people who have a MySpace page are people who also have a Facebook page, and traffic is falling, but not so fast as advertising revenues. MySpace could be decimated before the recession is over and people begin to think rationally about advertising again.
News Corp CEO Rupert Murdoch very publicly bought MySpace for $580 million back in 2005 and then cut a deal with Google for $900 million of revenue. Murdoch became a convert to the internet and also bought and IGN Entertainment for $650 million, to form Fox Interactive.
But with his true love being newspapers, Murdoch went and bought the Wall Street Journal, learned about paid content on the internet, and the power of a real brand, and is now proclaiming that the old free internet will soon be dead in favour of paid internet services. Perhaps being an internet guru was only right for Murdoch while it was a new toy and now he is cutting his losses, and getting Miller to tidy up.
This is the second time there has been a palace revolution at MySpace and the company has had multiple senior management teams, and a revamp after it missed a $1 billion revenue target last June. If Murdoch had known the depth of the recession coming he may have made more cuts, sooner.
What US analysts are immediately asking is whether or not any internet businesses are worth more than any other company. Traffic may surge on one, but then a slightly better web property comes along and everyone moves on to it. Perhaps Facebook will crumple as Twitter rises and that’s going to be the way of things for some time to come?
Revenues are expected to be down at $520 million in 2009 for MySpace, about a 15% drop and already Facebook is expected to pass $300 million this year.