News Corp Sells MySpace for $35 Million

Morning Star · Jun 30, 2011

News Corp Sells MySpace for $35 Million

NEW YORK (Reuters) - News Corp has sold Myspace for $35 million, a fraction of what it paid for the once-hot social media site even as a new generation of Web-based start-ups is enjoying sky-high valuations.

Advertising company Specific Media will team with the singer Justin Timberlake to acquire Myspace in a deal that caps a tumultuous period of ownership under Rupert Murdoch's News Corp, which swooped in to buy Myspace for $580 million in 2005.

At the time, Myspace was among the world's most popular websites, and News Corp's success in beating out rival Viacom Inc in a bidding war was viewed as a major victory for Murdoch. Since then, however, Facebook has eclipsed Myspace in popularity, and the deal has become a hard lesson in what can happen when a traditional media company imposes its will on a start-up.

It also shows how quickly audience -- and investor -- tastes can shift in the world of social networking. Indeed, Wednesday's deal contrasts sharply with the current frenzy over social media companies, including LinkedIn, Twitter and Groupon, among investors looking for the next big thing.

Another of the hot start-ups, Zynga, an online social game company, plans to raise up to $2 billion in an initial public offering that could be filed by Thursday, valuing the company at $20 billion.

"This is a mistake that will repeat itself," James McQuivey, an analyst with Forrester Research, said of the Myspace saga. "I'm not sure that someone being pushed on by early round investors, someone reading their own press, which is praising them, will stop and say, 'Wait, is this a one-year fad, a two-year fad? Or is this a five-year to ten-year change in the way things are done?'"

The Myspace transaction calls for News Corp to retain a minority stake in the website, the companies said in a statement, confirming a deal that was reported earlier.

Specific Media, which specializes in digital advertising, did not disclose financial terms. It announced, however, that Timberlake -- who happens to have played Facebook adviser and investor Sean Parker in the movie "The Social Network" -- would take an ownership stake and serve a "major role" in developing a strategy for Myspace.

A source familiar with the transaction said the deal is worth $35 million and is a mix of cash and stock. News Corp will retain about 5 percent, the source said.

Additionally, more than half of Myspace's 500-strong workforce is expected to be laid off because of the sale, the source said.

The deal comes after a four-month bidding process in which a number of different possible buyers surfaced, including other social networking sites and private equity firms. The auction had been expected to fetch in the neighborhood of $100 million.

In the end, the sale serves as the latest example of what can happen to a once coveted company with a rocket-like trajectory that quickly loses its luster as competitors zoom past it in popularity.

Founded in August 2003 by Chris De Wolfe and Tom Anderson, Myspace was conceived as a way for friends and fans to connect with one another as well as with their favorite bands and artists.

Myspace, a kind of musical version of pioneer social network site Friendster, fast became wildly popular with teenagers and young adults, who spent hours designing their own pages with their favorite digital wallpaper, posting photos and adding friends.

At its peak in 2008, Myspace attracted nearly 80 million people in the United States, almost double that of Facebook.

The growth was too fast and Myspace had trouble scaling the number of users who were flocking to the site. Meanwhile Facebook had opened up its platform to third-party developers, such as Zynga and its popular FarmVille game. That attracted more people and kept them on the site.
By 2011, the number of U.S. visitors to Myspace fell to about 40 million while those visiting Facebook totaled about 150 million, according to online measurement firm comScore.

For the quarter ended March 2011, News Corp reported a segment operating loss of $165 million, mainly due to declines at Myspace.

(Additional reporting by Paul Thomasch; Editing by Bernard Orr, Steve Orlofsky and Matthew Lewis)
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My Take: Social Networking will continue to thrive for a long time. The only way we'll see social networking become a fad would be the ability to literally traverse anywhere in the world through the comfort of your home. In the meantime, social media will continue to thrive on the mean of communications by unreachable areas.

Nerdy Girl · Jun 30, 2011

BigBrotherWise said: ↑

News Corp Sells MySpace for $35 Million

My Take: Social Networking will continue to thrive for a long time. The only way we'll see social networking become a fad would be the ability to literally traverse anywhere in the world through the comfort of your home. In the meantime, social media will continue to thrive on the mean of communications by unreachable areas.
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I think you're right about online social networking in general, but I think MySpace has been on the way out for a long time now. One of my friends joked that this sale price values the company at about $1 million per active user.

Morning Star · Jun 30, 2011

Obviously. I just deleted my MySpace account this past weekend and I have no regrets. I don't see a reason to get back on it. I don't have Facebook, nor Twitter. However, I may consider getting back on Facebook sometime in the future.

Nerdy Girl said: ↑

I think you're right about online social networking in general, but I think MySpace has been on the way out for a long time now. One of my friends joked that this sale price values the company at about $1 million per active user.
Click to expand...

Nerdy Girl · Jun 30, 2011

BigBrotherWise said: ↑

Obviously. I just deleted my MySpace account this past weekend and I have no regrets. I don't see a reason to get back on it. I don't have Facebook, nor Twitter. However, I may consider getting back on Facebook sometime in the future.
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I am on Facebook, but I refuse to do anything called "tweeting."

MySpace was an innovator at one point, but being first is not always best - ask the British who developed the tank, only to see its use perfected by the Germans.

Morning Star · Jun 30, 2011

Hahaha, the world is evolving...and yet I see another bubble.

Nerdy Girl said: ↑

I am on Facebook, but I refuse to do anything called "tweeting."

MySpace was an innovator at one point, but being first is not always best - ask the British who developed the tank, only to see its use perfected by the Germans.
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Nerdy Girl · Jun 30, 2011

BigBrotherWise said: ↑

Hahaha, the world is evolving...and yet I see another bubble.
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Quite likely, LittleBrotherWise.

Mikey · Jun 30, 2011

BigBrotherWise said: ↑

Obviously. I just deleted my MySpace account this past weekend and I have no regrets. I don't see a reason to get back on it. I don't have Facebook, nor Twitter. However, I may consider getting back on Facebook sometime in the future.
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You've got Skype by the way, which is nice.

Morning Star · Jun 30, 2011

Hey, it's inevitable.

Nerdy Girl said: ↑

Quite likely, LittleBrotherWise.
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Of course. I still use that since I know people there.

Mikey said: ↑

You've got Skype by the way, which is nice.
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4north1side2 · Jun 30, 2011

Nerdy Girl said: ↑

I am on Facebook, but I refuse to do anything called "tweeting."

MySpace was an innovator at one point, but being first is not always best - ask the British who developed the tank, only to see its use perfected by the Germans.
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Myspace wasn't the first social networking site...

Morning Star · Jul 1, 2011

What was the first one that pioneered social networking in general? AOL was a great lender with instant messaging and customizing your own page. But could that count as the first?

4north1side2 said: ↑

Myspace wasn't the first social networking site...
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CiViC SpiKeS · Jul 1, 2011

What a bad investment!

Soon as i saw Facebook i knew they would blow them out the water

DenzBenz · Jul 1, 2011

BigBrotherWise said: ↑

What was the first one that pioneered social networking in general? AOL was a great lender with instant messaging and customizing your own page. But could that count as the first?
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How can you forget BlackPlanet! The 4th oldest social networking site ever!

The oldest being SixDegrees.com, the 2nd oldest being LiveJournal and 3rd oldest being AsianAvenue.

DenzBenz · Jul 1, 2011

BigBrotherWise said: ↑

My Take: Social Networking will continue to thrive for a long time. The only way we'll see social networking become a fad would be the ability to literally traverse anywhere in the world through the comfort of your home. In the meantime, social media will continue to thrive on the mean of communications by unreachable areas.
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Check this out! The guys who started Myspace were quoted in Business Week magazine saying that they looked at BlackPlanet as a model for Myspace and thought there was an opportunity to do a general market version of what BlackPlanet was.

http://en.wikipedia.org/wiki/BlackPlanet

Morning Star · Jul 1, 2011

I never knew that at all. Thank you for the information there.

DenzBenz said: ↑

Check this out! The guys who started Myspace were quoted in Business Week magazine saying that they looked at BlackPlanet as a model for Myspace and thought there was an opportunity to do a general market version of what BlackPlanet was.

http://en.wikipedia.org/wiki/BlackPlanet
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