It’s over. After enduring years of spiralling traffic, job cuts and three chief executives in as many years, MySpace has finally been sold by News Corp for $US35 million.
After waves of massive job cuts, and a rebranding that largely failed to bring in new users, it was announced last night the site had been bought for $US35 million by advertising group Specific Media. It is a far cry from the $US550 million News Corp paid for the site back in 2005.
In an email to employees, MySpace chief executive Mike Jones says the site will undergo a major restructure, including “a significant reduction in our workforce”. It will not be the first.
MySpace has suffered a dramatic drop in traffic, membership and revenue. ComScore data shows the site lost 10 million users in just one month earlier this year, and that unique browses fell from 95 million to 63 million over the previous year.
Facebook overtook MySpace for traffic in 2008. And while it once counted more than 200 million users, estimates now pin that figure at just 30 million, compared to Facebook’s massive 750 million-strong user base.
There are a number of reasons MySpace failed. Here are five of the biggest.
Sell high, buy low
Much is being said today about the $US550 million News Corp paid in 2005 for MySpace. Of course it represents a devastating loss for the company – not to mention the other operating expenses it would have suffered as well.
But the price serves as a perfect lesson for the company’s original founders, including Brad Greenspan, original chief executive Chris DeWolfe, Josh Berman and president Tom Anderson.
While the ownership of MySpace at that time is disputed by some, there is no question its founders, whoever they were, managed to get a great deal at a time when social networking was becoming “the next big thing”.
But this is also one of the best decisions News Corp made during the entire MySpace lifespan. The $US500 million price tag could be seen as a bargain considering the site was valued at $US12 billion as late as 2007 – when it was still beating Facebook for traffic. News Corp should have gotten out sooner.
Learn to adapt
The News Corp acquisition of MySpace came at a fascinating time. By all accounts the site was doing extremely well, gaining millions of users with barely any competition – until Facebook came along.
The rise of Facebook represented a turning point for MySpace, and exposed one of its greatest failures – a lack of innovation.
Mark Zuckerberg was growing Facebook at a dizzying pace, adding new features all the time to keep people involved and to draw in new users. The news feed on a users’ home page was one of the most popular innovations at the time, and kept people coming back.
As Sean Parker points out on TechCrunch, there was a period of time between 2006 and 2008 when MySpace and Facebook were fighting hard for control of the market. But MySpace simply failed to add new features during a time of intense competition, and as a result it was viewed as boring.
Another major disappointment was that while Facebook opened up its site to developers, allowing them to create new features on their own, MySpace kept everything to itself.
MySpace didn’t need to copy Facebook to survive. But it least needed to offer an alternative, instead of giving users the same features they’d been using for a few years at that point.
…but focus on what you do best
Like any social network, MySpace has a number of features. And while some haven’t worked well at all – allowing users to control their own backgrounds with custom-made art was a horrible one – the site excels at two things: music and entertainment.
One of the main reasons anyone still visits the MySpace site is to find new music. It is still used by artists both large and small to show off new music, launch tour dates, and communicate with fans. It is one of the biggest successes of the site.
It’s why MySpace rebranded itself in October 2010 to focus on both music and entertainment content. Even the front page of the site now features large, bold graphics featuring music artists – you have to search for a while before you see any option to sign up with an individual profile.
But this update is four years too late.
Imagine if MySpace had rebranded itself four years ago, combed the best elements of individual profiles and expanded the music and entertainment section of the website. It’s reasonable to assume more people would have stuck around.
After all, MySpace had the clout to do so after signing deals with major labels. And in 2009, Nielsen found that traffic to the MySpace Music site had grown by a whopping 190% between September 2008 and June 2009.
Music is part of what MySpace does best – and it should have realised that before users started leaving.
Get your management structure right
Since News Corp acquired MySpace, the management of the company has been a mess. It has gone through so many internal changes that former staff say it ruined morale and created a lot of confusion about the vision of the company.
For one thing, some say the $US1 billion revenue target placed upon the site by Rupert Murdoch himself constrained the company and was an unrealistic expectation.
Chris DeWolfe was replaced by Owen Van Natta, who came fresh from a job as chief operating officer at Facebook. Van Natta resigned in 2010, replaced by Mike Jones and Jason Hirschhorn, who eventually resigned as well. Mike Jones will remain chief for the next two months.
Social networks do not work within large companies. They lose vision and have unrealistic expectations put upon them by executives who do not understand how to run these types of websites. The same criticism has been levelled at British site Friends Reunited, which was acquired by ITV for $US208 million in 2005.
The best thing News Corp could have done to MySpace was leave it alone.
New industries are always difficult
There is some weight in the argument that News Corp made a good decision when it bought MySpace. As it turns out, social networking was indeed the next big thing, and has largely defined much of the news in the tech industry over the last few years.
But this is not an old industry. It is barely a decade old, and even the market leaders are still trying to understand the best ways of interacting with users – even Google can’t understand how to get social networking right.
Social networking is not a variation on a theme, like mobile payments. It is an entirely new industry, and it was newer still in 2005. News Corp should not have bought the company outright at such an early point in the industry’s history.
ABOUT THE AUTHOR
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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