Why Murdoch’s MySpace is going back to its roots

WHEN Rupert Murdoch bought MySpace for $580m (£319m) back in 2005, most people thought he had gone crazy. A few years later when Microsoft snapped up a 1.6 per cent stake in rival Facebook, giving it a notional value of $15bn, all was forgotten; Murdoch had been right all along, picking up a mass market social network at a snip of a price. The recent news of swingeing job cuts at the website has seen the Web 2.0 bloggertariat switch yet again: MySpace, they sing in the style of a Greek chorus, is doomed.

The reason that most Silicon Valley bloggers give for MySpace’s difficulty is the media mogul himself. Rupert Murdoch, depending on the blogger is question, is either too old, too right wing or too corporate to make something young and liberal like MySpace work. In common Web 2.0-speak, he just doesn’t “get it”.

What he does “get”, however, is business. MySpace, despite having lost millions of users to arch rival Facebook, is virtually the only mainstream social network that has turned a profit. Having struck a lucrative deal with online advertising giant Google in 2006, analysts estimate that Murdoch’s social network has pulled in revenues of $1.6bn over the last three years. Based on revenues of $900m in 2008/09 and profit margins of nearly 20 per cent, they reckon that the site made at least $180m in profit last year.

The deal with Google, however, is coming to a close, and there is little chance of MySpace getting such good terms a second time round. The same analysts who think the site has been profitable in recent years say it could lose as much as $100m from next year onwards. That’s why News Corp has acted so decisively in recent months, replacing founder and chief executive Chris DeWolfe with Owen Van Natta and cutting staff across the board by around a third.

Although those who say Murdoch is too old or too right wing to make MySpace work are spouting nonsense, those who point to corporatism as a problem are right. In recent years, the site has begun to look like a traditional media company; in the UK, it employs around a dozen people who are journalists in all but name. Their job is to provide content for the site, but the whole point of a social network is that the owner develops the platform and the users – not the staff – bring the content.

With all this focus on content, the site has been neglected. It’s easy to lose count of the amount of times Facebook has mutated, but MySpace has barely changed since its launch. Instead, Dewolfe was too busy strutting the corporate stage, and spending cash on regional offices with too many staff. That’s why Van Natta is right when he says MySpace needs to adopt the “mentality of a start-up”. It also needs a cost base to match.