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Summary:

After cutting 500 jobs, Myspace boss Mike Jones has finally admitted that it’s time to spin off or sell the struggling social network. But Rupert Murdoch’s stubborn misunderstanding of the Internet means it is way too late for the site to make a worthwhile deal.

Mike Jones of Myspace

After undergoing more than its share of redesigns, job cuts and executive changes, Myspace is finally admitting it needs a way out. Chief Executive Mike Jones told an all-hands meeting of staff at the struggling social network that a spin-off, merger or sale is under consideration, according to Bloomberg.

Rumors of a potential sale have been making the rounds almost since the day Rupert Murdoch bought the site back in 2005 for $580m, but the real question is: Who, precisely, would want to buy Myspace right now?

If the site’s looking to spin off, it needs to find investors who think there’s a serious, profitable future in its business. Those investors are scarce; Myspace has neither the scale of Facebook (figures suggest MySpace now has around 65 million users worldwide, compared to Facebook’s 500 million) nor the utility of LinkedIn. If it wants to sell or merge, on the other hand, it needs to find a company that thinks it’s worth buying, and there are very few companies who might around these days.

In its earlier days, the natural home for the site, perhaps, was a company like MTV: a brand desperate to capture the youth market, the music world, and stay connected to its audience. With Myspace’s mojo gone, that seems unlikely now. Other potential purchasers? Once, that might have been Facebook, maybe, but the company is way too big to care today. AOL (which wouldn’t be a terrible fit) has already been burned enough with Bebo. And Google, though desperate to buy its way to social success, would surely not want to touch damaged goods.

Really, Jones’ comments are the final admission that News Corp. was always the wrong deal, and Rupert Murdoch the wrong buyer.

Of course, it made some kind of sense at the time. Murdoch’s greatest skill is selling exclusivity — peddling material you can’t get anywhere else, whether that’s through deal-making or rule-breaking.

His newspapers and broadcast channels have followed this master plan well, offering Hollywood movies, opinionated news, titillating tabloid reporting, financial insight and major sports deals as a hook to get people buying.

That scheme was always going to be headed for trouble once the Internet started rolling, since it’s pretty good at killing exclusivity. But, for a while at least, Myspace promised exactly what Murdoch was looking for: By becoming the go-to place for musicians on the web, it was a way to stuff the cat back into the bag and create exclusivity where it didn’t exist previously.

The trouble is, if your advantage is that you’re better than everybody else, then you have to work really hard to stay that way. Otherwise, all it takes is some kid from Harvard to come up with something less ugly and you’re suddenly passé. We all know how that ended up: Murdoch’s Internet empire is left manufacturing exclusivity by using paywalls or iPad-only news.

So what does Myspace have left that it can offer buyers? Musicians and fans don’t care any more. They sell their music through iTunes, talk to their fans on Twitter and let YouTube take care of videos.

All Myspace really has to offer is an out-of-date reputation and the personal details of some 65 million users who — for the large part — don’t care what happens to it.

That leaves its best options are probably lower tier competitors like Hi5 or Friendster, or somebody who really just wants to purchase a huge but rapidly expiring database of identities. Perhaps its best exit is to end up just how it started: as a vast spam trap.

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  1. They should merge with ReverbNation. I’ve already tweeted the fact that PaidContent moaned and groaned that the musicians have “nowhere to go” if MySpace dies. Rubbish. ReverbNation.

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  2. I suspect you’re right Rex, though possibly in a more general sense: it will merge or get bought by a lower-order social/music company looking for a quick leg-up in subscriber numbers.

    I’m not exactly sure what Myspace’s user demographics are, and whether the research by danah boyd that suggested it’s got a place among urban, non-mainstream, non-white youths remains accurate, but I can imagine it might appeal to somebody targeting the markets where it remains most popular.

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    1. I think ReverbNation would be smart to try a merger while MySpace is desperate. A merger would help boost ReverbNation up as the place for musicians and bands. The MySpace add of ~65 million would really help solidify RN as the defacto music standard; at least for 2011. :)

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  3. Vevo. The labels are already in bed with both Vevo and MySpace Music, so NewsCorp can take a big write-down on royalty payments, something Vevo can likely absorb with sweetheart label deals. It gives them a big SEO-ed channel to plug in more video views and is their only hope of significant traffic growth this year barring a Justin Bieber-Lady Gaga duet.

    I doubt that ReverbNation has anywhere near the cash or cache to buy out MySpace from NewsCorp without a huge VC backer.

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  4. Google.

    Here’s 6 reasons:

    1. Google has done a content play before in YouTube. Not only that, but YouTube has all the problems around User Generated Content that MySpace would have. So they know how to handle it and how to monetize it.

    2. Google controls a huge proportion of the traffic that searches for music, lyrics, etc. and could guide it to MySpace (Google) Music pages (as opposed to wikipedia or artist’s homepages or facebook).

    3. With Google looking to get into a music service for consumers, a web page for those Artists will be required. MySpace has millions and millions of artist pages already built and ready to go.

    4. I think that Google has an exclusive (or nearly exclusive) deal with MySpace for advertising, so they can monetize all the additional search traffic that is generated by #3 (a virtuous cycle, like with YouTube). No need to kick any other advertising deals to the curb which could be complicated and expensive. Its a clear path.

    5. MySpace has deals with all of the Major Labels and Google wants to deliver a music service to consumers, so this could be a bargaining chip, as the labels would like to continue to get paid for the streaming that happens on MySpace. Labels should also want to do something to bring in a real competitor to Apple’s iTunes (which leaves the label’s powerless). Having another super-power in music would create a much better bargaining position for the labels as they can now play Apple and Google off on each other.

    6. Google buying MySpace would quickly make it the one of the most important places on the web for Bands to be (like YouTube). Almost any other buyer would not have Artists saying “Hmmm, I’ll go back and pay attention to that site again.” But Google buying it would.

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  5. [...] for social media sites to keep up with steady influxes of new features and new users. But, as the ever-worsening Myspace situation illustrates, it doesn’t always go according to plan and popularity can be fleeting. Another [...]

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