LEX When rushing towards a brick wall, don’t accelerate. That is what MySpace, the online social network, was doing before Jonathan Miller – former AOL boss – was brought in this spring to shake up the internet division of parent company News Corp. Even though online advertising had been hit by the recession, MySpace’s costs grew during the three months ending in March.
Plans to cut 420 jobs – nearly a third of MySpace’s workforce – are therefore a late but necessary step as News Corp confronts some tough online realities. Long the toast of the internet world – and the centrepiece of Rupert Murdoch’s online strategy – MySpace’s cachet has been dented by the rise of Facebook, which overtook the former as the world’s most popular social network last year.
What is more, Google – which tacitly admits the $900m it paid three years ago to show ads on MySpace was overly generous – is unlikely to offer similar terms when the deal comes up for renewal next year. New sales efforts, such as MySpace’s joint venture with music labels, will take time to fill the resulting hole in the company’s top line.
Owen van Natta, the former Facebook executive brought in by Mr Miller to run MySpace after the departure of founder Chris DeWolfe in April, says MySpace needs to become more innovative, even as it shrinks. He is right: the company has been outclassed by Facebook at nearly every turn since it broke into the mainstream two years ago. MySpace is not starting from scratch. Its position inside News Corp gives it access to valuable original content. But Mr van Natta will not find it easy to out-manoeuvre his nimbler rival, whose bigger and more affluent user base makes it ever more attractive to advertisers.
BACKGROUND NEWS | |
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MySpace, once the world’s largest internet social network, will cut its US workforce by 30 per cent, or about 400 employees, as it fights for relevance against stiff competition from Facebook. The restructuring of the company, owned by Rupert Murdoch’s News Corp, will include an evaluation of its global operations. It will employ 1,000 in the US after the cuts. |
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