When Rupert Murdoch’s News Corp (NWS) bought MySpace for $580 million, Wall St. viewed it as a brilliant move. Murdoch got one of the fastest-growing properties on the Internet and it was on it way to becoming one of the largest.
Murdoch has had trouble making money on MySpace. Its revenue last year was pegged at under $1 billion. Google (GOOG) cut a deal to pay News Corp $900 million over three years to have exclusive rights to sell search ads on MySpace. The contract is not likely to be renewed due to the underperformance of the revenue from the social network.
MySpace is facing even more trouble as rival Facebook has passed 225 million users and is projected to have 300 million by later this year, according to AllFacebook. Most data from measurement services including comScore show that MySpace is barely growing at all.
Facebook’s expansion may be a Pyrrhic victory. Industry estimates are that the huge social network will bring in only $550 million in sales this year. For a site with over 225 million users that sum is extremely disappointing.
Marketers have still not discovered a way to make social networks an effective medium for most advertising. Users cannot easily be grouped in such a way to spark advertiser interest. Visitors to the sites do not go to content destinations like finance or entertainment the way that they do at portal sites like AOL (TWX), MSN (MSFT), of Yahoo! (YHOO).
Facebook could become the largest web property in the world as measured by users, but it may never make a dime.
Douglas A. McIntyre