Can Internet Free Agents Rescue MySpace?

myspacesaviorsWhen the New York Yankees spent more than $400 million signing up free agent pitchers C.C. Sabathia and A.J. Burnett, along with first baseman Mark Texiara, the team was betting that it would not only make it to the World Series, but win. After this weekend’s clean sweep by the Boston Red Sox, however, that looks like a mission impossible.

News Corp is counting on the equivalent of three Internet free agents to replace Chris DeWolfe and Tom Anderson and revive MySpace, the big but not so bountiful social network. The three free agents are CEO Owen Van Natta (former COO of Facebook), COO Mike Jones (founder and CEO of Userplane) and Chief Product Officer Jason Hirschhorn (former president of SlingMedia.) These three men are certainly capable, but they are on a mission impossible. As I’ve said in the past — the era of general purpose social networking is over and it impacts no one more than MySpace.¬†There are many challenges facing MySpace, among them:¬†

  • Though it leads in the U.S. in terms of traffic, Facebook has almost caught up, and there seems to be very little room left to grow.
  • Its strategy to capture portal advertising dollars may have helped revenues in the short term, but Pali Capital analyst Richard Greenfield argues that’s it’s also served to increase the company’s costs.
  • MySpace’s advertising-related deal with Google ends on June 30, 2010. With that a steady supply of revenues — about $300 million in 2009, estimates Pali Capital — is going to dry up. If MySpace indeed gets a new search deal in fiscal 2011 at a 50 percent discount from the current rate, according to Pali, it will have to grow sales by 27 percent organically. Tough targets, don’t you think?
  • Facebook is using its 200 million-plus user base to become a dominant web ID player, further marginalizing MySpace as a platform, which hasn’t managed to successfully capture the imagination of developers.

That said, I think MySpace Music is a nice niche opportunity — how big of one remains to be seen. For the three free agents — good luck guys! You are really going to need it.

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