News Corp. Set To Take Huge Loss on Myspace

At one time, MySpace was one of the hottest web properties in the world.

News Corp., the international media empire that is run by Rupert Murdoch, purchased Intermix Media (owner of Myspace.com) back in 2005 for $580 million. Many eyebrows were raised at the time of the transaction, but Murdoch and company quickly quieted the naysayers as Myspace continued to grow in leaps and bounds. Some analysts even valued Myspace at over $1.5 billion in the months following the News Corp. purchase. It appeared, for a short time anyways, that Rupert Murdoch was going to make a killing on his Myspace purchase.

Fast forward roughly six years, and News Corp. is reportedly preparing to jettison Myspace for a fraction of what they paid for it. Various media reports have the sale price being somewhere in the $30-$35 million range (News Corp. was reportedly looking for $100 million when they started the sale process). On top of the $550 million haircut that News Corp. is going to take on this sale, there is no telling how much money News Corp. sunk into the site during the six years that they owned it.

Who are the potential buyers of Myspace? Two names have surfaced - Specific Media and Golden Gate Capital. One (Specific Media) is an advertising network, while the other is a large private equity firm. Both companies will reportedly be building the new Myspace around music.

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Myspace should be a cautionary tale for anybody who is thinking about investing money in a company such as Facebook or Groupon when they become publicly traded companies.

Internet users (especially younger Internet users) are notoriously fickle and will start using new sites (and abandoning older ones) in a heartbeat. On top of that, technology is constantly evolving - you never know what unbelievably cool new company is just around the corner that will capture the attention of the masses.

At one time, Myspace was one of the largest web sites in the world. Countless millions of people had Myspace pages that they used on a daily basis. Now, just a few short years after the company hit its peak, people say that visiting a Myspace page is like "taking a stroll through your attic".

With Facebook preparing to go public in 2012, and with the company expected to command a valuation of over $100 billion, I have to ask - would you invest your hard-earned money in the company at that valuation, especially given how fickle Internet users can be? Right now, as I type this article, there is somebody who is working on a site in their basement that will eventually challenge and overcome Facebook. Something newer and cooler will come along and replace Facebook one day - of that, you can be certain. When that happens, what will Facebook be worth?

Source: All Things D - Exclusive: Myspace Sale Nearing End Today With Low $30M Price and Buyer You Never Heard Of

Filed under: Internet Companies