How Big of a Loss Will News Corp. Take on Myspace?

News Corp., which is the international media company that is run by Rupert Murdoch, purchased Myspace back in 2005 for $580 million.

The $580 million price tag for Myspace had many people doing double takes at the time. However, in the months following the completion of the deal, Myspace continued to grow in leaps and bounds, and the deal (at least initially) was looking to be a savvy one for Rupert Murdoch.

Unfortunately for Murdoch, a site called Facebook came along and stole all of Myspace's mojo.

Facebook opened its doors to the public in 2006 and completely exploded in 2007-2008, and has never looked back. Myspace, on the other hand, has seen its traffic numbers wither away, thanks to an exodus to sites such as Facebook and Twitter.

Myspace, a site that was once one of the most-trafficked on the Internet, was now dying on the vine. Myspace just wasn't "cool" anymore, and people were leaving in droves. As somebody once said, "visiting a Myspace site is like taking a stroll through your attic".

Myspace's traffic numbers plummeted, as did its ad revenues. According to the WSJ, the site's traffic numbers have dropped 49% over last year.

According to the Wall Street Journal, "the News Corp. segment that includes Myspace reported an operating loss of $156 million for the quarter ended Dec. 31, primarily because of the site's poor performance".

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News Corp. has seemingly grown frustrated with Myspace and has put the company up for sale. According to various sources, News Corp. will not accept bids of anything less than $100 million. Apparently there are a few companies contemplating a purchase of the site, including Redscout Ventures and Criterion Capital Partners LLC. In order to help facilitate a sale, News Corp. has opened up Myspace's books to any prospective buyers.

If a company does decide to purchase Myspace, it seems unlikely that the final purchase price will significantly exceed $100 million, given how much money the site is apparently losing. Even if somebody ends up paying $200 million for Myspace, News Corp. will still end up taking a massive loss on their initial investment.

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The rise and fall of Myspace should be a warning to any social media company out there. Internet users are fickle, and what is hot one year might be yesterday's news the next. The Facebooks and Twitters of the world will eventually be surpassed and replaced by something else as well - it's inevitable.

Source: WSJ.com - Bids for Myspace Expected This Week

Filed under: General Knowledge