3 reasons to give up on MySpace
Nearly half the staff has been laid off. It's time to sell the social-networking also-ran while it still has value.
Back in October, News Corp. (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 and ad system that imitates its top rival, Facebook. The hope was that the 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? Well, more than 500 MySpace employees were laid off last month -- almost half the staff. 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.
The writing is on the wall: Rupert Murdoch & Co. need to give up on MySpace and sell the operations ASAP. Though News Corp. is allegedly listening to offers, it simply cannot afford to wait. Here are the three biggest reasons:
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 that 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 (AAPL) or Amazon (AMZN) begins providing comparable tools to musicians.
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 (YHOO) -- was integrated into MySpace last November was the moment the site's social-network 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 would 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.
I actually liked MySpace before they tried to imitate Facebook, which I cannot stand. The draw for me on MySpace was the fact that I could follow my favorite bands and listen to their new music, as well as keep track of concert dates. I also liked the fact that you used to be able to give your profile personality with unique backgrounds and such using the editor they had. However the biggest reason I preferred MySpace is that at any time I could completely delete my profile from their database, something you can never do on Facebook...
I wish it was Facebook, not MySpace, that would've crawled under a tree in the woods and just died.
Chadprincess, if you can now forever delete your profile from Facebook that is a very new and recent feature. Because I know that was one thing among many that Facebook caught flak for, is that once you created a profile it could never be permanently deleted, only "de-activated". With MySpace, as soon as you accepted the deletion notice it is gone, no waiting or "de-activation", it was removed from their profile database instantaneously.
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It's time for a reality check in advance of the Chinese e-commerce giant's much anticipated initial public offering.
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