News Corp (NWS) MySpace: Taking Failed Model Abroad

April 16, 2008 by Douglas A. McIntyre

Fox Interactive, the online division of News Corp (NWS), will miss its numbers. A few of the marketing executives there lost there jobs. It would seem that the primary culprit is MySpace, the world’s largest social network. According to ZDNet Fox said "it has reshuffled its management and ad operations–a sign that problems monetizing MySpace persist."

The value of social networks probably peaked last year when No.2 property Facebook got a $15 billion valuation during a round of financing. But, making money on these business is going to be very hard.

A great deal of the revenue flowing to MySpace today comes from a three-year deal with Google. The search company has the exclusive right to provide its search services. In exchange its sells its Ad Sense program on MySpace and guarantees $900 million in revenue sharing. The arrangement probably masks the weak revenue picture at the social network.

Now, MySpace plans to push hard to get overseas. According to The Wall Street Journal "Despite its aggressive expansion overseas, MySpace, which has about 110 million monthly users globally, is losing momentum to U.S. rival Facebook, and other fast-growing upstarts."

But, that may not matter. Marketers are growing wary of social networks. Their members are hard to target. Many of them reveal little about themselves and most do not want to see ads when they go to look at information about their friends and relatives.

As online advertisers look for places to invest their dollars vertical content sites, portals, and Google still look much better. They allow for targeting by both interest and demography.

MySpace may move overseas, but it cannot escape the fact that it is a bad venue for marketing dollars.

Douglas A. McIntyre